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NORTH CAROLINA
REGISTER
VOLUME 13 • ISSUE 9 • Pages 753 - 802
November 2, 1998
IN THIS ISSUE
Executive Order
Labor - Verbatim Adoptions of Federal Standards
Voting Rights Letters
Administrative Hearings, Office of
Cosmetic Art Examiners
Environment and Natural Resources
Health and Human Services
Revenue
Secretary of State
State Personnel, Office oi
Rules Review Commission
Contested Case Decisions
PUBLISHED BY
The Office ofAdministrative Hearings
Rules Division
PO Drawer 27447
Raleigh, NC2 7611- 744 7
Telephone (919) 733-2678
Fax (919) 733-3462
RECEIVED
NOV 2 1998
KATHRINE R. EVERETT
LAW LIBRARY
This publication is printed on permanent, acid-free paper in compliance with G.S. 125- 11.13
For those persons that have questions or concerns regarding the Administrative Procedure Act or any of jj
components, consult with the agencies below. The bolded headings are typical issues which the givi
agency can address, but are not inclusive.
I
Rule Notices, Filings, Register, Deadlines, Copies of Proposed Rules, etc.
Office of Administrative Hearings
Rules Division
Capehart-Crocker House (919) 733-2678
424 North Blount Street (9 1 9) 733-3462 FAX
Raleigh, North Carolina 27601-2817
contact: Molly Masich, Director APA Services
Ruby Creech. Publications Coordinator
mmasich@oah.state.nc.us
rcreech@oah.state.nc.us
Fiscal Notes & Economic Analysis
Office of State Budget and Management
116 West Jones Street
Raleigh. North Carolina 27603-8005
contact: Mark Sisak, Economist III
(919)733-7061
(919) 733-0640 FAX
msisak@osbm.state.nc.us
Rule Review and Legal Issues
Rules Review Commission
1307 Glenwood Ave., Suite 159
Raleigh. North Carolina 27605
contact: Joe DeLuca Jr., Staff Director Counsel
Bobby Bryan, Staff Attorney
(919)733-2721
(919) 733-9415 FAX
Legislative Process Concerning Rule-making
Joint Legislative Administrative Procedure Oversight Committee
545 Legislative Office Building
300 North Salisbury Street (919) 733-2578
Raleigh, North Carolina 2761
1
(919) 715-5460 FAX
contact: Mary Shuping, Staff Liaison marys@ms.ncga.state.nc.us
County and Municipality Government Questions or Notification
NC Association of County Commissioners
2 1 5 North Dawson Street' (9 1 9) 7 1 5-2893
Raleigh, North Carolina 27603
contact: Jim Blackburn or Rebecca Troutman
NC League of Municipalities
215 North Dawson Street
Raleigh, North Carolina 27603
contact: Paula Thomas
(919)715-4000
This publication is printed on permanent, acid-free paper in compliance with G.S. 125-1 1.13
NORTH CAROLINA
REGISTER
ii.
in.
IN THIS ISSUE
EXECUTIVE ORDERS
Executive Order No. 140 753 - 754
IN ADDITION
Labor
Verbatim Adoptions of Federal Standards
Voting Rights Letters
755
756 - 758
RULE-MAKING PROCEEDINGS
Secretary of State
N.C. Electronic Commerce Act 759
Volume 13, Issue 9
Pages 753 - 802
November 2, 1998
This issue contains documents officially filed
through October 12. 1998.
Office of Administrative Hearings
Rules Division
424 North Blount Street (27601
)
PO Drawer 27447
Raleigh. NC 276 11 -7447
(919)733-2678
FAX (919) 733-3462
Julian Mann III. Director
Camille Winston. Deputy Director
Molly Masich. Director of APA Services
Ruby Creech. Publications Coordinator
Jean Shirley, Editorial Assistant
Linda Dupree. Editorial Assistant
Jessica Flowers. Editorial Assistant
IV. PROPOSED RULES
Environment and Natural Resources
Sedimentation Control Commission 760
Revenue
Corporate Income & Franchise Tax 760 - 762
Individual Income Tax 762 - 767
Sales and Use Tax 767 - 773
State Personnel, Office of
State Personnel Commission 773 - 778
V. APPROVED RULES 779-786
Administrative Hearings, Office of
Civil Rights Division
Environment and Natural Resources
Environmental Health Services
Wildlife Resources
Health and Human Services
Governor Morehead School
Medical Assistance
Mental Health: General
Social Services
Licensing Boards
Cosmetic Art Examiners
VI. RULES REVIEW COMMISSION 788-790
VII. CONTESTED CASE DECISIONS
Index to ALJ Decisions 791-796
Text of Selected Decisions
98 EHR 0322 797-803
VIII. CUMULATIVE INDEX 1-74
Xorth Carolina Register is published semi-monthh for $195 per \ ear b\ the Office of Administrative Hearings. 424 North Blount Street. Raleigh. NC
27601. (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh. NC. POSTMASTER : Send Address changes to the North Carolina Register.
PO Drawer 27447. Raleigh. NC 2761 1-7447
NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM
The North Carolina Administrative Code (NCAC) has four major subdivisions ofrules. Two ofthese, titles and chapters,
are mandatory. The major subdivision ofthe NCAC is the title. Each major department in the North Carolina executive
branch of government has been assigned a title number. Titles are further broken down into chapters which shall be
numerical in order. The other two, subchapters and sections are optional subdivisions to be used by agencies when
appropriate.
TITLE/MAJOR DIVISIONS OF THE NORTH CAROLINA ADMINISTRATIVE CODE
TITLE DEPARTMENT LICENSING BOARDS CHAPTER
1 Administration Acupuncture 1
2 Agriculture Architecture 2
3 Auditor Athletic Trainer Examiners 3
4 Commerce Auctioneers 4
5 Correction Barber Examiners 6
6 Council of State Certified Public Accountant Examiners 8
7 Cultural Resources Chiropractic Examiners 10
8 Elections Employee Assistance Professionals 11
9 Governor General Contractors 12
10 Health and Human Sen ices Cosmetic Art Examiners 14
11 Insurance Dental Examiners 16
12 Justice Dietetics "Nutrition 17
13 Labor Electrical Contractors 18
14A Crime Control & Public Safety Electrolysis 19
15A Environment and Natural Foresters 20
Resources Geologists 21
16 Public Education Hearing Aid Dealers and Fitters 22
17 Revenue Landscape Architects 26
IX Secretary of State Landscape Contractors 28
19A Transportation Marital and Family Therapy 31
2(1 Treasurer Medical Examiners 32
*21 Occupational Licensing Boards Midwifery Joint Committee 33
">"> Administrative Procedures Mortuary Science 34
23 Community Colleges Nursing 36
24 Independent Agencies Nursing Home Administrators 37
25 State Personnel Occupational Therapists 38
26 Administratis e Hearings Opticians 40
27 NC State Bar Optometry 42
Osteopathic Examination & Reg. (Repealed) 44
Pastoral Counselors. Fee-Based Practicing 45
Pharmacy 46
Physical Therapy Examiners 48
Plumbing. Heating & Fire Sprinkler Contractors 50
Podiatry Examiners 52
Professional Counselors 53
Psychology Board 54
Professional Engineers & Land Surveyors 56
Real Estate Appraisal Board 57
Real Estate Commission 58
Refrigeration Examiners 60
Sanitarian Examiners 62
Social Work Certification 63
Soil Scientists 69
Speech & Language Pathologists & Audiologists 64
Substance Abuse Professionals 68
Therapeutic Recreation Certification 65
Veterinan Medical Board 66
Note: Title 21 contains the chapters of the various occupational licensing boards.
2 '
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**
EXECUTIVE ORDERS
health data in North Carolina.
C. Members of the Council shall be reimbursed for
necessary travel and subsistence expenses as authorized
under state law and in accordance with state policies and
procedures. Funds for such expenses shall be made
available from funds provided by the grant from the
Robert Wood Johnson Foundation.
D. The continuation of this Executive Order, or any renewal
or extension thereof, is dependent upon and subject to the
availability of funds for the purposes set forth herein.
( See North Carolina General Statutes §143-34.2.)
This Executive Order is effective immediately.
f
_ i
Done in Raleigh. North Carolina this 29"1 day of September.
1998.
\
754 NORTH CAROLINA REGISTER November 2, 1998 13:9
INADDITION
This Section contains public notices that are required to he published in the Register or hcn-e been approved by the Codijier
of Rules for publication.
North Carolina Department of Labor
Division of Occupational Safety and Health
NOTICE OF VERBATIM ADOPTIONS
OF FEDERAL STANDARDS
The following is a summary of federal OSHA standards recently adopted verbatim by the Division of Occupational Safety and Health.
The details are contained in the cited Federal Registers (FR). The effective date of the associated AC Administrative Code rule
changes is October 8. 1998:
(1) Methylene Chloride — Amendments to Final Rule (63 FR 50711-50732, 9/22/98) : These amendments add a provision
for temporary medical removal protection benefits of employees who use or are exposed to methylene chloride and changes
the start-up dates for achieving permissible exposure limits using engineering controls.
(2) Asbestos — Revision (63 FR 35137-35138, 6/29/98) : With these revisions, asbestos-containing roofing cements, mastics
and coatings are no longer regulated bv the shipvard asbestos (29 CFR 1915.1001) and construction asbestos (29 CFR
1926.1101) standards.
(3) Standards Improvements for General Industry and Construction Standards (63 FR 33449-33469, 6/18/98) : These
amendments correct or eliminate provisions of certain standards that are out of date, duplicative, unnecessary, or
inconsistent.
(4) Respiratory Protection — Corrections (63 FR 20098-20099. 4/23/98) : The Respiratory Protection Final Rule (63 FR
1 152 et sec/.. 1 8 98). adopted by OSHNC on 4'8 98. is corrected to maintain the provisions of the previous standard until
the final compliance date (10/5/98) of the new standard. The remaining changes correct typographical and technical errors.
(5) Collection of Information — Approvals and Renewals (63 FR 17093-17094) : These approvals and renewals are
associated with the following standards:
(a) noise (f) asbestos in construction
(b) access to employee exposure and medical records (g) formaldehyde
(c) lead in general industry (h) bloodbome pathogens
(d) ionizing radiation (i) lead in construction
(e) asbestos in general industry (j) asbestos in shipyards
For additional information regarding these adoptions please contact:
Peggv D. Morris
Division of Occupational Safety and Health
319 Chapanoke Road
Raleigh. NC 27603-3432
(919)662-4581
pmorris 5 mail. dol. state. nc. us
13:9 NORTH CAROLINA REGISTER November 2, 1998 755
INADDITION
U.S. Department of Justice
Civil Rights Dnision
EJ:DHH:JPC:jng
DJ 166-012-3
98-2288
I bting Section
PO Box 66128
Washington D.C. 20035-6128
August 28, 1998
Michael Crow ell. Esq.
Tharrington Smith. L.L.P.
P.O.Box 1151
Raleieh. North Carolina 27602- [51
Dear Mr. Crowell:
This refers to the procedures for conducting the September 15. 1998. special election to fill a school board vacancy for
the Northampton Counts School District in Northampton County North Carolina, submitted to the Attorney General pursuant xa
Section 5 of the Voting Rights Act. 42 U.S.C. 1973c. We received your submission on July 1. 1998.
The Attorney General does not interpose any objection to the specified change. However, we note that Section 5
expressly provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of
|
the change. See the Procedures for the Administration of Section 5 (28 C.F.R. 5 1 .4 1 ).
Please be ad\ ised that our facilities are inadequate to process large numbers of submissions transmitted through the
facsimile process. Therefore, this method of submitting voting changes should be employed only in unusual situations following
consultation with the Voting Section. We urge you to forward future submissions to the following address for delivery by the |
United States Postal Service: Chief. Voting Section. Civil Rights Division. P.O. Box 66128. Washington. D.C. 20035-6128.
Submissions to be delivered by commercial express service companies should be addressed as follows: Chief. Voting Section.
Civil Rights Division. HOLC Building. Room 818A. 320 First Street. N.W.. Washington. D.C. 20001. In either case the en\ elope
and first page should be marked: Submission under Section 5 of the Voting Rights Act.
Sincerely,
Elizabeth Johnson
Chief. Votina Section
756 NORTH CAROLINA REGISTER November!, 1998 13:9
INADDITION
U.S. Department of Justice
Civil Riahts Division
EJ:DHH:JAC:emr Voting Section
DJ 1 66-0 1 2-3 PO Box 66128
98-2542 Washington. DC. 20035-6128
September 22. 1998
Jesse L. Warren, Esq.
City Attorney
P.O. Box 3 136
Greensboro. North Carolina 27402-3136
Dear Mr. Warren:
This refers to the annexation (Ordinance No. 98-100) to the City of Greensboro in Guilford County, North Carolina,
submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act. 42 U.S.C. 1973c. We received your submission
on July 28. 1998.
The Attorney General does not interpose any objection to the specified change. However, we note that Section 5
expressly provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of
the change. See the Procedures for the Administration of Section 5 (28 C.F.R. 5 1 .4 1 ).
Please be advised that it is unnecessary to provide multiple copies of documents when making a Section 5 submission.
Sincerely,
Elizabeth Johnson
Chief Voting Section
13:9 NORTH CAROLINA REGISTER November 2, 1998 757
INADDITION
U.S. Department of Justice
Civil Rights Division
EJ:VLO:K.IF:par Voting Section
DJ 1 66-0 1 2-3 PO Box 66128
98-2551 Washington. D.C. 20035-612*
98-2708
September 25. 1998
David A. Holec. Esq.
City Attorney
P.O. Box 7207
Greenville. North Carolina 27835-7207
Dear Mr. Holec:
This refers to the seven annexations (Ordinance Nos. 53. 54. 60. 61. 62. 63. and 64 (1998)). and their designation to
districts for the City of Greenville in Pitt County. North Carolina, submitted to the Attorney General pursuant to Section 5 of the
Voting Rights Act. 42 U.S.C. 1973c. We received your submissions on July 27 and August 1 1. 1998.
The Attorne\ General does not interpose am objection to the specified changes. However, we note that Section 5
expressly provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of
the changes. See the Procedures for the Administration of Section 5 (28 C.F.R. 5 1 .4 1 ).
Sincerelv.
Elizabeth Johnson
Chief. Voting Section
<
75# NORTH CAROLINA REGISTER November 2. 1998 13:9
RULE-MAKING PROCEEDINGS
A Notice of Rule-making Proceedings is a statement of subject matter of the agency's proposed rule making. The agency
must publish a notice of the subject matter for public comment at least 60 da\s prior to publishing the proposed text of a
rule. Publication ofa temporary rule serves as a Notice ofRule-making Proceedings and can be found in the Register under
the section heading of Temporary Rules. A Rule-making Agenda published by an agency serves as Rule-making
Proceedings and can be found in the Register under the section heading ofRule-making Agendas. Statutoiy reference: G.S.
150B-21.2.
TITLE 18 - SECRETARY OF STATE
7V Totice ofRule-making Proceedings is hereby given by the Secretaiy ofState in accordance with G.S. 1 50B-21.2. The agency
J. V shall subsequently publish in the Register the text ofthe rule(s) it proposes to adopt as a result ofthis notice ofrule-making
proceedings and any comments received on this notice.
Citation to Existing Rules Affected by this Rule-Making: None - Other rules may- be proposed in the course of the rule
making process.
Authority for the rule-making: G.S. 66-58.10
Statement of the Subject Matter: Notice is hereby given in accordance with G.S. 150B-21.2 that the Secretaiy of State
(Secretary) will consider adopting rules enabling administration ofthe North Carolina Electronic Commerce Act, G.S. 66-58.1 et
seq. These rides may include, but are not limited to. definitions: the creation, accreditation, bonding, licensing, operation,
regulation and sanctioning of certification authorities: the imposition of licensing and renewal fees: and the imposition of civil
monetaiy penalties for noncompliance with Article 11A of Chapter 66 of the General Statutes or the rules promulgated
thereunder.
Reason for Proposed Action: To enable administration ofthis North Carolina Electronic Commerce Act. G.S. 66-58.1 et seq.
1. To enact requirements regarding the creation, accreditation, bonding, licensing, operation, regulation and sanctioning of
certification authorities.
2. To enact rules regulating the use ofelectronic signatures.
3. To enact rule relating to the assessment ofcivil penalties for violations ofArticle 11A ofChapter 66 ofthe General Statues and
the rules promulgated thereunder.
4. To establish licensing and renewal fees.
Comment Procedures: The Department requests that persons interested in this rulemaking participate, if possible, in the
Department's Internet-linked rulemaking project. This site is accessible from the Department's homepage, at
M-ww.state.nc.us secstate. Written comments may also be submitted on the subject matter of the proposed rule-making to Scott
Templeton. Deputy Secretaiy ofState. North Carolina Department of the Secretaiy ofState. 300 North Salisbuiy Street. Raleigh.
North Carolina 2 "603-5909.
13:9 NORTH CAROLINA REGISTER November 2, 1998 759
PROPOSED RULES
This Section contains the text ofproposed rules. At least 60 days prior to the publication oftext, the agency published
a Notice ofRule-making Proceedings. The agency must accept comments on the proposed rule for at least 30 days from
the publication date, or until the public hearing, or a later date ifspecified in the notice by the agency. The required
comment period is 60 days for a rule that has a substantial economic impact of at least five million dollars
(S5.000.000). Statutory reference: G.S. 150B-21.2.
TITLE ISA - DEPARTMENT OF ENVIRONMENT
AND NATURAL RESOURCES
Notice is hereby given in accordance with G.S. 1 50B-21 .2
that the Sedimentation Control Commission intends to
amend the rules cited as 15A NCAC 4B .0106-010'. .012'.
Notice of Rule-making Proceedings was published in the
Register on April 15. 1998.
Proposed Effective Date: April 1. 1999
A Public Hearing will be conducted at 7:00 p.m. on
November IS. 1998 at the Archdale Building, Ground Floor
Hearing Room, 512 N. Salisbury Street, Raleigh, NC.
Reason for Proposed Action: This action is necessaiy to
comply with the Action Plan adopted by the North Carolina
Sedimentation Control Commission on November 19. 199'.
The Action Plan was developed as an effort to better control
sedimentation damage.
Comment Procedures: Comments will be accepted through
December 2, 1998. Mailed comments may be sent to F. Me!
I
Nevils. DENR, Division of Land Resources, PO Box 2'68~,
Raleigh. NC 27611.
Fiscal Note: These Rules do not affect the expenditures or
revenues of state or local government funds. These Rules do
not have a substantial economic impact ofat least five million
dollars (S5, 000, 000) in a 12-month period.
CHAPTER 4 - SEDIMENTATION CONTROL
SUBCHAPTER 4B - EROSION AND SEDIMENT
CONTROL
SECTION .0100 - EROSION AND SEDIMENT
CONTROL
.0106 BASIC CONTROL OBJECTIVES
An erosion and sedimentation control plan may be
disapproved pursuant to 15A NCAC 4B t00+8 .0118 if the
plan fails to address the following control objectives:
( 1 ) Identify Critical Areas: Identify site areas subject to
severe erosion, and off-site areas especially
vulnerable to damage from erosion and
sedimentation.
(2) Limit Exposed Areas. Limit the size of the area
exposed at any one time.
(3) Limit Time of Exposure. Limit exposure to the
shortest feasible time.
(4) Control Surface Water. Control surface water run-off
originating upgrade of exposed areas in order to
reduce erosion and sediment loss during exposure.
(5) Control Sedimentation. All land-disturbing activity
is to be planned and conducted so as to prevent off-site
sedimentation damage.
(6) Manage Storm Water Runoff. When the increased
velocity of storm water runoff resulting from a land-disturbing
activity causes accelerated erosion of the
receiving watercourse, plans shall include measures
to control the velocity to the point of discharge.
(7) When deemed necessary bv the approving authority
a preconstruction conference mav be required.
Authority G.S. U3A-54(d)(4); 113A-54.1.
.0107 MANDATORY STANDARDS FOR
LAND-DISTURBING ACTIVITY
(a) No land-disturbing activity subject to this article shall be
undertaken except in accordance with the G.S. 1 3A-57.
(b) Pursuant to G.S. 113A-57(3). provisions for a ground
cover sufficient to restrain erosion must be accomplished
within 34} J_5 working days or 4^4} 90 calendar days following
completion of construction or development, whichever period
is shorter, except as provided in 15A NCAC 4B .002 4 ( e ).
.0124(e).
(c) Pursuant to G.S. 113A-57(4) and 1 13A-54(d)(4), an
erosion and sedimentation control plan must be both filed and
approved by the agency having jurisdiction.
Authority G.S U3A-54(d)(4); 113A-57; U3A-57(3)(4).
.0127 PLAN APPROVAL CERTIFICATE
(a) Approval of a sedimentation and erosion control plan
will be contained in a document called "Certificate of Plan
Approval" to be issued by the Commission.
(b) The Certificate of Plan Approval must be posted at the
primary entrance of the job site before construction begins.
(c) No person ma\ initiate a land-disturbing activity until
notifying the agency that issued the Plan Approval of the date
that the land-disturbing activity will begin.
Authority G.S. U3A-54(b).
TITLE 17 - DEPARTMENT OF REVENUE
Notice is hereby given that the Department of Revenue t
intends to amend rules cited as 1' NCAC 5B .010'.
"
.1105; 17 NCAC 5C .0703, .2004. .2101; and repeal rule
cited as 1 ' NCAC5C.21 02.
760 NORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
Editor's Note: G.S. 150B-l(d)(4) exempts the Department of
Revenue from Part 2 Article 2A ofChapter 150 with respect to
the notice and hearing requirements. The Department will
however publish the text of proposed rides in the North
Carolina Register prior to the scheduled time ofreview by the
Rules Review Commission.
Proposed Effective Date: July 1. 1999
Instructions on How to Demand a Public Hearing (must be
requested in writing within 15 days of notice): A person may
request a public hearing by sending a written request for a
hearing to Mr. Jack Harper, Corporate. Excise, and Insurance
Tax Division. P.O. Box 871. Raleigh. NC 27602. by
November 19. 1998. Notice of any public hearing scheduled
on these proposed Rules will be published in the Register.
Reason for Proposed Action: / 7 NCAC 5B .0107 - This ride
is amended to eliminate duplication between it and 17 NCAC
5C .2004. The requirements for obtaining an extension for
filingfranchise tax are the same as for corporate income tax.
17 NCAC SB .1105 - The current rule implies that investment
in a domestice subsidiary can be deducted, which is not the
case and would be discriminatory if it were. The rule is
amended to eliminate this erroneous implication.
1 7 NCAC 5C .0703 - The rule categorizes all dividend income
received by a company that does not deal in securities as
nonbusiness income. This conflicts with the position the
Department has followed since the Secretary's Hearing
Decision, docket number 95-144.
17 NCAC 5C. 2004 - Chapter 300 of the 199' Session Lcnvs
deleted the requirement that tax due be pjid to received an
extension. This change reflects the change made by that law.
17 NCAC 5C. 2101 - The rule is amended to consolidate it
with 17 NCAC 5C .2102. to delete parts that repeat the
statutes, and to delete obsolete information.
17 NCAC 5C .2102 - This rule is being repealed because its
context is being moved to 17 NCAC 5C .2101.
Comment Procedures: Written comments may be submitted
to Mr. Jack Harper at North Carolina Department of Revenue.
Corporate. Excise and Insurance Tax Division. PO Box 871,
Raleigh, NC 27602. Comments received will be taken into
consideration in adopting the permanent rule. If you have
questions, you may call Mr. Harper at (919) '33-8484.
CHAPTER 5 - CORPORATE INCOME AND
FRANCHISE TAX DIVISION
SUBCHAPTER 5B - FRANCHISE TAX
SECTION .0100 - GENERAL INFORMATION
.0107 EXTENSION OF FILING DATE
(*)
—
Prior to the regular due date, a corporation may apply
for an e xt ension of time for fi l ing it s return. An ext ension of
time to file th e franchise and income tax return may be granted
for seven months providing th e full amount of franchise tax
and income tax anticipated to be due is paid with the timely
fil ed extension application.—The extens ion will be granted
automatically provided:
f-H th e total tax is remitted with th e application form;
(3}—the
—
corporation's—records—reflect—ne
—
delinqu ent
returns or outstanding tax liability.
(b) Form CD 110 is th e application for extension form that
must be filed be fore an e xtension of time to fil e the return can
be granted.—The application shall be completed in duplicate.
Int erest is charged on all extended tax payments at th e rate
establi s hed pursuant to G.S. 105 2 -l l.l(i).
Rule 17 NCAC 5C .2004 sets out the procedure for a
corporation to obtain an extension of time to file its corporate
franchise and income tax return.
Authorin- G.S. 105-129; 105-262; 105-263.
SECTION .1100 - CAPITAL STOCK: SURPLUS AND
UNDIVIDED PROFITS BASE
.1105 INVESTMENT IN SUBSIDIARY
For purposes of G.S. 105-122, the capital stock, surplus
surplus, and undivided profits base may not be reduced by the
amount invested in a foreign subsidiary.
Authority- G.S. 105-122; 105-262.
SUBCHAPTER 5C - CORPORATE INCOME TAX
SECTION .0700 BUSINESS AND NONBUSINESS
INCOME
.0703 BUSINESS AND NONBUSINESS INCOME
The classification of income by the labels customarily given
them, such as interest, rents, royalties, or capital gains, is of no
aid in determining whether that income is business or
nonbusiness income. The gain or loss recognized on the sale
of property, for example, may be business income or
nonbusiness income depending upon the relation to the
taxpayer's trade or business:
( 1
)
Rental income from real or tangible personal
property constitutes business income when the rental
of such the property is a principal business activity
of the taxpayer or the rental of the property is related
to or incidental to the taxpayer's principal business
activity.
(2) A gain or loss from the sale, exchange exchange, or
other disposition of real or personal property
constitutes business income if the property while
owned by the taxpayer was used to produce business
income. However, the gain or loss will constitute
nonbusiness income providing:
(a) such the property was subsequently utilized
principally for the production of nonbusiness
income for a period of at least three years
13:9 NORTH CAROLINA REGISTER November 2, 1998 761
PROPOSED RULES
prior to the disposition; and
(b) sueb the property was reflected as
nonbusiness on the corporate income tax
returns filed for those years.
(3) Interest income is business income if the intangible
with respect to which the interest was received
arises out of or was created by a business activity of
the taxpayer and in those situations where the
purpose for acquiring the intangible is directly
related to the business activity of the taxpayer.
(4) Dividend income is business income when dealing
in securities is a principal business activity of the
taxpayer. Oth er dividends are nonbus iness incom e.
(5) Patent and copyright royalties are business income if
the patent or copyright was created or used as an
integral part of a principal business activity of the
taxpayer.
Authority G.S. 105-130.4; 105-261
SECTION .2000 - EXTENSION OF TIME FOR
FILING RETURN
.2004 EXTENSION OF FILING DATE
fa)
—
An extension of time to til e th e franchise and income
tax return may be granted for seven months providing the fu l l
amount of franchise tax and income tax anticipated to be due is
pa i d with th e time ly fil ed extension application. The e xtension
w i l l be granted automatically provided:
f4) th e tota l tax is remitted with th e applicat i on form:
f2-) fee
—
corporation's—record s
—
re fl ect—no
—
de linquent
returns or outstanding tax liability,
(b) Form CD 119 is the application for e xt ension form that
must be fil ed before an extension of tim e to ti le the return can
be granted.—
T
h e app l ication shall be compl eted in duplicat e .
The original shal l be fil ed with the Corporate Incom e and
Franchi se Tax Divis i on on or before the 15th day of th e th i rd
month fol lowing the close of th e income year and the duplicate
copy attached to th e return when fil ed. An approved copy of
th e application will not be return ed to the taxpay er.—
P
ayment
of tax i s required as follows:
Franchi se Tax One hundred perce nt of th e amount of
franchise tax e xpected to be due for the taxable year mus t be
paid with the ext en s ion application filed.
Income Tax One hundred pe rc ent of the amount of income
tax expected to be due aft e r deducting estimated income tax
payme nts made during th e corporation's taxable year must
be paid with the extension application fil ed.
A corporation will receive a seven-month extension of time
to fije its corporate franchise and income tax return if the
corporation timely files Form CD-419. Application for
Extension of Time To File Corporate Franchise and Income
Tax Return. Payment of tax js not required to obtain an
extension; however, interest accrues at the rate set under G.S.
1 05-24 1.1 (i) on the amount not paid by the due date of the
corporate franchise and income tax return and the failure to
pay penalty in G.S. 105-236(4) applies to the amount not paid
by the due date of the return.
Authority G.S. 105-262; 105-263.
SECTION .2100 - DISSOLUTIONS AND
WITHDRAWALS
.2101 REQUIREMENTS WHEN CORPORATION
ENDS
fa-)
—
A corporation that has been voluntarily dissolved
purs uant to G.S. 55 11 01 shall fil e all tax reports and returns
du e and pay all taxes due the Departm ent of Revenue .—The
Departm ent shall notify s uch corporation of any unfulfill ed tax
requirements. After the end of th e year in which th e
dissolution occurs, a dissolved corporation shall not be subj ect
to th e annual franchise tax unles s th e corporation engages in
busin ess—activiti es—net
—
appropriate—te
—
winding—up—and
liquidating its business affairs,
(b) A corporation that has been administrative ly dissolved
pursuant to G.S. 55 1 1 21 s hal l file all reports and returns due
and pay all taxes due th e Department.
A domestic corporation that js dissolved, whether
voluntarily, administratively, or judicially, or a forei an
corporation that withdraws from the State or has its certificate
of authority revoked must file all tax reports and returns due
and pay aj] taxes due. The final return of a corporation that
has been dissolved, has withdrawn, r has had its certificate of
authority revoked must include in income any unrealized or
unreported profit from installment sales.
Authority G.S. 55-14-01; 55-14-20; 55-14-30; 55-15-20; 55-
15-30; 105-130.16; 105-262.
.2102 WITHDRAWALS/FILING REQUIREMENTS
fa)
The Rev enue Departm ent will notify a corporation
which i s withdrawing from North Carolina of any unfulfill ed
tax requirements.
(b) The final return of a corporation which is dissolving or
withdrawing must includ e in income any unreal i zed, deferred
or unreport ed profit from insta l lment sales and pay th e tax due
with such return be fore its dis solution or withdrawal—is
approved.
Authority G.S. 55-15-20; 105-130.15; 105-262.
WXWXXWXXXX K X X W X
Notice is hereby given that the Department of Revenue
intends to amend rules cited as 1" NCAC 6B .0104.
.0110. .0I1H. .0606. .3203. .3206. .3901. .3904. .4004; 17
NCAC 6C .0124.
Editor's Note: G.S. 150B-1 (d)(4) exempts the Department of
Revenuefrom Part 2 Article 2.4 ofChapter 150 with respect to
the notice and hearing requirements. The Department will
however publish the text of proposed rules in the North
Carolina Register prior to the scheduled time ofreview by the
Rules Review Commission.
762 NORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
Proposed Effective Date: July 1. 1999
Instructions on How to Demand a Public Hearing (must be
requested in writing within 15 days of notice): A person may
request a public hearing by sending a written request for
hearing to Mr. Sam McEwen, Personal Taxes Division, at PO
Box 871. Raleigh. NC 27602. by November 19. 1998. Notice
of any public hearing scheduled on these proposed rule
changes will be published in the Register.
Reason for Proposed Action: 1 ' NCAC 6B .0104 - The rule
is amended to reflect the fact that a person does not have to be
single to file a federal 1040EZ.
17 NCAC 66 .0110 - The rule is amended to delete the
references to the Interstate Commerce Commission and to
make technical changes. The ICC has been abolished and the
duties relevant to this rule have been transferred to the
Surface Transportation Board.
1 7 NCAC 6B .0118 - The rule is amended to make a technical
correction in paragraph (j) of the rule; the technical
correction deletes a duplicate reference to Form NC 8453.
17 NCAC 6B .0606 - The rule is amended to reflect changes
made by Chapter 100 of the 1998 Session. That bill deleted
the prohibition against nonresidents claiming the child care
tax credit.
17 NCAC 6B .3203 - The rule is amended to reflect changes
made by Chapter 696 of the 1996 Session. That act revised
the failure to pay penalty.
17 NCAC 6B .3206 - The rule is amended to reflect the fact
that the failure to pay peiialty cannot be assessed when a fraud
penalty is assessed. Failure to pay is assessed when there is
an absence of intent to evade the tax. and fraud is assessed
when there is an intent to evade the tax. The two are therefore
mutually exclusive.
17 NCAC 6B .3901 - The rule is amended to make technical
changes and to remove the implication that voting by absentee
ballot is more determinative than the other factors. All the
factors are taken together and any single factor does not have
more weight than any other single factor.
17 NCAC 6B .3904 - The rule is amended to reflect changes
made by Chapter 100 of the 1998 Session. That act deleted
the prohibition against nonresidents claiming the child care
tax credit.
17 NCAC 6B .4004 - The rule is amended to reflect the fact
that a shareholder ofan S corporation can be a beneficiary
17 NCAC 6C .0124 - The rule is amended to reflect changes
in the allowable exemption amount in G.S. 105-1 34. 6tc)(4a).
Extra withholding allowances are tied to the amount of the
personal exemption.
Comment Procedures: Written comments may be submitted
to Mr. Sam McEwen at North Carolina Department of
Revenue. Personal Taxes Division. PO Box 871, Raleigh. NC
2 '602. Comments received will be taken into consideration in
adopting the permanent rule. Ifyou have questions, you may
call Mr. McEwen at (919) 733-3565.
CHAPTER 6 - INDIVIDUAL INCOME TAX
DIVISION
SUBCHAPTER 6B - INDIVIDUAL INCOME TAX
SECTION .0100 - FILING INDIVIDUAL INCOME
TAX RETURNS
.0104 ITEMS REQUIRING SPECIAL ATTENTION
(a) A taxpayer must use the income tax form for the year in
which his or her taxable year begins.
(b) The name and current address of the taxpayer must be
plainly printed. The first name, middle initial, and last name
must be printed or typed. When a preaddressed form is used.
any error in the name or address must be corrected.
(c) When filing an income tax return for an unmarried
individual who died during the taxable year, write "Deceased"
after the individual's name on the return followed with the
name and address of the executor or administrator.
Example: John Doe (Deceased). Richard Doe. Executor; 100
Oak Street. Anwhere. North Carolina. 27000.
(d) The On a return, a taxpayer must furnish his or her
social security number and the name and social security
number of his or her spouse and must indicate whether they
are living togeth e r or apart, with the return, filing jointly or
separately.
(e) The same filing status checked on the Federal income
tax return must be checked on the North Carolina income tax
return (Federal Form 10 IQEZ fil ers must ch eck singl e ), return.
However, if either the taxpayer or the taxpayer's spouse is a
nonresident and had no North Carolina taxable income for the
taxable year, the filing status MARRIED FILING
SEPARATELY must be checked.
(f) Each applicable line of the tax return must be completed
and the entering of words or phrases, such as
"unconstitutional" or "object - self incrimination" does not
meet the requirement of completing each applicable line on the
return.
(g) The tax must be computed accurately and. in the case of
a delinquent return, the penalty and interest prescribed by
statute must be added.
(h) If an individual has moved into or out of North Carolina
during the tax year or is a nonresident with income from
sources within North Carolina, the section on Form D-400.
Computation of North Carolina Taxable Income for Part-Year
Residents and Nonresidents, must be completed. Credit for tax
paid to another state is not allowed to an individual moving
into or out of this State unless the individual has income
derived from and taxed by another state or country while a
resident of this State.
(i) If a tax credit is claimed, there must be attached to the
return a true copy of the return filed with the other state or
country and a canceled check, receipt, or other proof of
payment of tax to the other state or country.
(j) Every return must be signed by the taxpayer or his or her
authorized agent, and joint returns must be signed by both
spouses.
13:9 NORTH CAROLINA REGISTER November 2, 1998 763
PROPOSED RILES
(k) Where tax has been withheld, the state copy of the
Wage and Tax Statement must be attached to the return.
(1) Any additional information that will assist in the
processing and auditing of a return must be indicated on the
return or a worksheet or schedule attached to the return.
(m) Anyone who is paid to prepare a return must sign the
return in the space provided. The signature must be by hand.
Stamps and labels are not acceptable.
Authority G.S. 28A-15-8; 105-151; 105-152; 105-154; 105-
155; 105-163. 5(e); 105-163.'; 105-163. 10; 105-251; 105-252;
105-262.
.0110 COMMON CARRIERS
(a) The Amtrak Reauthorization and Improvement Act of
1990 provides that no part of the compensation paid to an
employee of an interstate railroad subject to the jurisdiction of
the Int e rstate Comme rce Commission (ICC) federal Surface
Transportation Board may be subject to income tax. or income
tax withholding, in any state except the state of the employee's
residence when swb the employee performs regularly assigned
duties in more than one state. The Act also precludes the
taxation of compensation paid by an interstate motor carrier
subj e ct to th e jurisdiction of th e ICC or to an employee e£-a
privat e motor carri er performing sen ices in two or more states
except by the state of the employee's residence. Therefore, the
compensation received by saeh these nonresident employees
on and aft e r Jul) 6. 1990. for services performed in this state
s hall not be State |s not subject to North Carolina income tax
or income tax w ithholding.
(b) Under the Federal Aviation Act (49 USCS-1512). a
nonresident airline employee rendering services on an aircraft
shall not be js not liable for North Carolina income tax unless
h+s the emplovee's scheduled flight time in North Carolina is
more than 50 percent of h+s the employee's total scheduled
flight time during the calendar year. If the emplovee's flight
logs show that more than 50 percent of the scheduled flight
time is in North Carolina, the amount of income reportable to
this state State shall be based on the percentage that his the
North Carolina flight time is to h4s the total flight time for the
year.
Authority G.S. 105-163.2; 105-163.18; 105-262.
.0118 ELECTRONIC FILING OF INDIVIDUAL
INCOME TAX RETURNS
(a) Participants in the Federal State Electronic Filing
Program are defined as follows:
(1) Electronic Return Originator (ERO). - A firm, an
organization, or an individual who deals directly
with the taxpayer, who either prepares a tax return
for the purpose of having an electronic return
produced or collects a prepared tax return for the
purpose of having an electronic return produced,
and who obtains the taxpayer's signature on Form
NC 8453. Individual Income Tax Affirmation for
Electronic Filing.
(2) Transmitter. - A firm, an organization, or an
individual who transmits electronic returns directly
to the Internal Revenue Service (IRS).
(3) Software Developer. - A person who designs
software for the purpose of formatting return:
according to electronic return specifications of the
Internal Revenue Service and the North Carolina
Department of Revenue or transmits electronic
returns directly to the IRS.
A firm, an organization, or an individual may choose to
perform one or all of the functions associated with electronic
filing.
(b) To participate in the Federal State Electronic Filing
Program applicants must complete Form NC 8633.
Application to Participate in the Electronic Filing Program,
and must be accepted into the Internal Revenue Service
Federal Electronic Filing Program. Effective for tax year 1994
applicants and prior participants must also pass a suitability-check
and receive a letter of acceptance for the current filing
season as explained in Paragraph (c) of this Rule.
(c) Suitability checks are performed on all new applicants
and all previous participants, on an annual basis, except for
software developers. The following suitability checks may
result in an applicant or previous participant being denied from
acceptance into the program:
(1
)
Conviction of a criminal offense under the revenue
laws of the State of North Carolina, or of any
offense involv 'g dishonesty or breach of trust.
(2) Failure to file timely and accurate tax returns, both
personal and business.
(3) Failure to pay personal or business tax liabilities. If1
failure to pay taxes is the determining factor in not
being allowed to participate in the program, a
conditional acceptance is provided. The terms of the
acceptance are as follows:
(A) Applicant must pay all outstanding liabilities
within six months of the date the application
is received by the Department of Revenue or
by the first day allowable for transmission of
returns, whichever is earlier.
(B) Failure to fully pay the liabilities within six
months results in exclusion from the
electronic filing program. After the liability is
paid, a new application must be submitted for
reconsideration.
(4) Misrepresentation on an application.
(5) Suspension or rejection from the program in a prior
year if corrective action is not taken and approved
by the North Carolina Department of Revenue.
(6) Other facts or conduct of a disreputable nature that
would reflect adversely on the program.
(7) Unethical practices in return preparation.
(d) The Department shall send the applicant a letter of
acceptance for participation in the Federal State Electronic
Filing Program for the current filing season after passing the
suitability check. If the applicant does not pass the suitability
check, a letter of rejection explaining the reason for rejection
and the applicant's right of appeal shall be sent to the
applicant.
764 NORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
(e) The applicant agreement requires the participant and the
participants employees to comply with all of the provisions of
Internal Revenue Service Publication 1345, Handbook for
Electronic Filers of Individual Income Tax Returns, of North
Carolina Department of Revenue Handbook for Electronic
Filers of Individual Income Tax Returns, and of related
publications for the applicable years of participation.
(f) Effective for tax year 1995. a new application, Form NC
8633, shall not be required each year. If an applicant is
accepted into the Federal/State Electronic Filing Program for
tax year 1994, an application is not required for subsequent tax
years except for revisions and supplements including changes
to the electronic filer's ownership structure, business name,
contact representative's name or telephone number, functions
performed, applicant or branch office(s) or drop-off collection
point(s).
(g) Completed applications must be received by the North
Carolina Department of Revenue prior to transmitting returns
on or before December 1 preceding the tax year for which the
application is made.
(h) After an electronic return has been prepared and before
the return is transmitted electronically, the taxpayer (and
spouse, if a joint return) must verify the information on the
return and sign and date a completed Form NC 8453.
Individual Income Tax Affirmation for Electronic Filing. The
preparer/transmitter must provide the taxpayer with a paper
copy of the return. :
(i) Form NC 8453 must be submitted to the Department
with all required schedules, attachments, and information by
the ERO no later than the next working day after receiving the
IRS acknowledgment of the federal return with a "NC"
indicator. The "NC" indicator establishes that a North Carolina
return was received by the IRS Memphis Service Center with a
corresponding federal return. The State return will be
electronically down-loaded to the North Carolina Department
of Revenue for processing.
(j) A copy of Form NC 84 53 and 8453, copies of the
taxpayers' wage and tax statements, schedules explaining other
modifications made on Form D-400, and other documents
requiring signatures must be retained by the ERO until the end
of the >ear in which the return was filed. Substitute wage and
tax statements and copies of wage and tax statements
generated by a preparer" s or transmitter's software are not
acceptable. The employer-issued state copy of the wage and
tax statement is the only acceptable wage and tax statement.
(k) After the ERO receives IRS acknowledgment with a
"NC" indicator. Forms NC 8453 shall be batched and mailed
to the Department of Revenue in the same manner as the
federal forms 8453s are furnished to the Internal Revenue
Service. Forms not received by the Department in a timely
manner will be requested in writing by the North Carolina
Department of Revenue Electronic Filing Coordinator. Any
request for missing Forms NC 8453s must be responded to in a
timeh manner. Failure to comply w ith the obligations of an
Electronic Filer can cause the applicant's participation in the
electronic filing program to be terminated.
(1) The status levels of a participant in the electronic filing
program are as follows:
(1) Accepted in good standing - electronic filing
participant who has filed a North Carolina
application for electronic filing and has met all the
criteria for the electronic filing program and has not
received a written warning from the Department.
(2) Warning status - electronic filing participant who
has been issued a letter of warning due to
noncompliance with program requirements.
(3) Probation - electronic filing participant who has
been issued a warning letter from the Department.
(4) Termination - electronic filing participant who has
failed to comply with the terms of probation or has
committed flagrant violations of the program
requirements.
(m) Taxpayer returns transmitted by an applicant or former
participant who has been rejected from the program shall not
be processed by the Department. The taxpayers shall be
notified to file paper returns.
(n) Terminated participants may apply for reinstatement in
the Federal/State Electronic Filing Program upon compliance
with all requirements of the program.
Authority G.S. 105-262.
SECTION .0600 - TAX CREDITS
.0606 CREDIT FOR CHILD AND DEPENDENT
CARE EXPENSES
(a) A tax credit is allowable for the employment-related
expenses for child and dependent care. The credit is
calculated on the net qualified federal employment-related
expenses after reduction for any employer-paid dependent care
assistance that is excluded fron federal gross income. In
calculating the credit, expenses incurred in the previous tax
year but not paid until the current tax year shall be included.
(b) For purposes of determining the credit allowed under
G.S. 1 05- 1 5 1 . 1 1 , an individual individuals who h are not able
to dress, clean, or feed himself themselves because of a
physical or mental condition « are not able to care for himself.
themselves. Individuals with mental conditions who require
constant attention to prevent them from injuring themselves or
others are considered to be unable to care for themselves.
(c) For a dependent who becomes age seven during the
taxable year and who is not physically or mentally incapable of
caring for himse lf, himself or herself, the tax credit for
employment-related expenses incurred prior to the dependent's
seventh birthday shall be calculated using the percentages in
the column labeled Percentage B under G.S. 105-151. ll(al).
The tax credit for employment-related expenses incurred after
the dependent becomes age seven shall be calculated using the
percentages in the column labeled Percentage A under G.S.
105-151. Il(al).
(d) If an individual was a res i dent of North Carolina and his
spouse was a nonresident, h e may not claim cred i t for any
employment re l at ed—
e
xpenses—paid—by—h+s
—
spouse . An
individual w ho was a nonresident during any part of the tax
year, must reduce the employment rel at ed expenses by the
amount h e pa i d during th e pe riod he was a nonres i dent. A
1 3:9 NORTH CAROLINA REGISTER November 2, 1998 765
PROPOSED RULES
nonresident or part-vear resident |s allowed this tax credit jn
proportion to the amount of federal taxable income, as
adjusted, that is taxable by North Carolina.
Authority G.S. 105-151.11; 105-262.
SECTION .3200 - PENALTIES: INDIVIDUAL
INCOME TAX
.3203 PENALTIES FOR FAILURE TO FILE AND
PAY
(a) General. ~ Under the provisions of G.S. 105 236 105-
236. both the failure to tile and failure to pay penalties, if due.
can be applied for the same month. If a return is filed late
without payment of the tax shown due. both the lat e filing and
lat e payment failure to file and failure to pav penalties will be
assessed at the same time.
(b) Extension. ~ If the return is filed under an extension,
the failure to file and fai l ure to pay penalti es will be assessed
penalty applies from the extended filing date rather than from
the original due date. The failure to pay penalty is 1 perc ent
of the tax not paid by the e xt ended applies from the original
due date of the return. The failure to pay penalty will app l y on
any rema i ning balance due if is assessed when the tax paid by
the original due date of the return is less than 90 percent of the
total amount of tax due. If the 90 percent rule is met. any
remaining balance due. including interest, must be paid with
the income tax return on or before the expiration of the
extension period to avoid the lat e payme nt failure to pay
penalty. Interest is due from the original due date to the date
paid.
(c) Amended Return. ~ The failure to pay penalty does not
apply to amounts paid w ith an amended return if the amount
shown due on the return is paid when the return is filed.
(d) Assessment. — The failure to gay penalty applies to a
proposed assessment of additional tax due that js not paid
within 30 davs of the assessment.
Authority G.S. 105-152<e): 105-155;
105-160.'; 105-236: 105-262; 105-263.
105-157:105-160.6;
.3206 FRAUD PENALTY
When an audit is based upon a federal audit report and the
fraud penalty has been assessed for federal purposes, the 50
percent fraud penalty will be assessed for state State purposes.
When the fraud penalty is assessed, no penalty for negligence
shall be is assessed with respect to the same deficiency:
however, other penalties including for failure to fil e , failure to
pay. and th e pe nalty for file and underpayment of estimated
income tax will be assessed if applicable with respect to the
same deficiency.
Authority G.S. 105-159; 105-163.15; 105-236:105-262.
SECTION .3900 - NONRESIDENTS AND PART-YEAR
RESIDENTS
.3901 DEFINITION OF RESIDENT
«
(a) Domicile means the place where an individual has
true, fixed permanent home and principal establishment, and t
which place, whenever he is absent, he the individual has th
intention of returning. In many cases, a determination must
made as to when or whether a domicile has been abandoned
A long standing principle in tax administration, repeatedl
upheld by the courts, is that a man an individual can have bu
one domicile: and. once established, it is not legally abandonee
until a new one is established. A taxpayer may have severa
places of abode in a year, but at no time can an individual hav<
more than one domicile. A mere intent or desire to make i
change in domicile is not enough; voluntary and positiv
action must be taken.
(b) Some of the tests or factors to be considered ir
determining the legal residence of an individual for income ta>
purposes are as follows:
(I)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
:io)
Place of birth.
Permanent residence of father parents.
Family connections, close friends.
Address given for military purposes.
Civic ties, church membership, club or lodge
membership.
Bank account or business connections.
Payment of state income taxes.
Listing of "legal" or "permanent" address on Federal
tax returns.
C. "tinuous car registration and driver's license.
Voting bv absentee ballot (one of th e best te sts to
determine perman ent residence ), ballot.
(11) Occasional visits or spending one's leave "at home
if a member of the armed services.
(12) Ownership of a home.
(13) Professional ties-teachers, bar. CPA. etc.
certificates.
(14) Attendance of children at State supported colleges
or universities on a basis of residence—taking
advantage of low er tuition fees.
(15) Execution of approved certificates or other
statements indicating permanent residence.
(16) Expression of intention.
(c) A legal resident of North Carolina serving in the United
States Armed Forces is liable for North Carolina income tax
and North Carolina income tax shall be withheld from his that
individual's military pay whether he the individual is stationed
in this State or in some other state or country.
(d) An individual who enters military service while a
resident of North Carolina is presumed to be a resident of this
State for income tax purposes. Residency in this State is not
abandoned until residency is established elsewhere.
(e) To change residency, th e servic eman an individual in
military service must not only be present in the new location
with the intention of making it his a new domicile, but must
also factually establish that he the individual has done so.
Authority G.S. 105-1 34.lt 12); 105-134.5; 105-262.
.3904 TAXABLE INCOME OF NONRESIDENTS
AND PART-YEAR RESIDENTS
i
766 NORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
(a) Nonresidents and part-year residents are required to
prorate their federal taxable income to determine the portion
that is subject to North Carolina tax.
(b) An individual who files a joint federal income tax return
with his or her spouse but cannot qualify to file a joint North
Carolina income tax return because the spouse is a nonresident
and had no North Carolina taxable income must calculate the
individual's federal taxable income on a federal income tax
form as a married person filing a separate federal income tax
return and attach it to the individual's North Carolina return to
show how the separate federal taxable income was determined.
The individual filing the separate federal return must report
only the individual's income, exemptions, and deductions. In
lieu of making the calculation on a federal form, an individual
may submit a schedule showing the computation of the
individual's separate federal taxable income. An individual
who submits a schedule must attach a copy of pages 1 and 2 of
the individual's joint federal return if the federal return reflects
an address outside North Carolina.
(c) An individual who has income from sources within
another state or country while a resident of North Carolina and
is subject to tax on the income by the other state or country
may be eligible to claim a tax credit under G.S. 105-151.
(d) A nonresident is not entitled to the tax credit s credit for
tax paid another state or country or for child and dependent
care expenses, country.
deductions are expected to exceed the standard deduction and
for each two thousand five hundred dollars (S2.000) ($2.500)
of adjustments reducing income. For taxpayers whose annual
income equals or exceeds the applicable threshold for their
filing status, an additional allowance may be claimed for each
two thousand dollars (S2.000) that their itemized deductions
are expected to exceed the standard deduction and for each
two thousand dollars ($2.000) of adjustments reducing
income. The thresholds are:
Filing Status Applicable Threshold
Head of Household $80.000
Married $50.000
Single $60.000
(b) Tax Credits. — If an employee An employee who will be
entitled to a tax credit, he credit may claim one additional
allowance for each one hundred forty dollars ($110.00)
seventv-five dollars ($175.00) of tax credit, credit, unless the
employee's annual income equals or exceeds the applicable
threshold set out in paragraph (b) of this Rule for the
employee's filing status. In that circumstance, the employee
may claim an additional allowance of only one hundred forty
dollars ($140.00) for each tax credit.
Authority G.S. 105-163.3; 105-163.5: 105-262.
x -x w yt w w XWJCWWWWWWWWWW
Authority G.S. 105-134.5: 105-151: 105-262.
SECTION .4000 - S CORPORATION
.4004 TAX CREDITS
If part of the S corporation's income is earned yvithin and
taxed by another state, either to the individual or to the
corporation, a resident shareholder is entitled to a tax credit on
h+s the individual or the estates and trusts income tax return for
h+s the share of the tax paid to the other state. A shareholder
claiming the tax credit must attach a schedule to his the income
tax return reflecting the total amount of tax paid to the state
State by the S corporation, and explaining how his the
shareholder's pro rata share of the tax was determined.
Nonresident shareholders are not allowed credit for tax paid to
another state.
Authority G.S. 105-131.8; 105-262.
SUBCHAPTER 6C - WITHHOLDING
Notice is hereby given that the Department of Revenue
intends to amend rules cited as 17 NCAC 7B .0104.
.0206. .1301 .:303. .1602. .1905. .2101.
Editor's Note: G.S. 150B-1 (d)(4) exempts the Department of
Revenuefrom Part 2 Article 2A ofChapter 150 with respect tf'
the notice and hearing requirements. The Department will
however publish the text of proposed rules in the North
Carolina Register prior to the scheduled time ofreview by the
Rules Review Commission.
Proposed Effective Date: July 1. 1999
Instructions on How to Demand a Public Hearing (must be
requested in writing within 15 days of notice): A person may
request a public hearing by sending a written request for a
hearing to Mr. Tim Holmes. Sales and Use Tax Division, at
PO Box 871, Raleigh. NC 27602. by November 19. 1998.
Notice of any public hearing scheduled on these proposed
Rules will be published in the Register.
SECTION .0100 - WITHHOLDING INCOME TAXES
.0124 ADDITIONAL WITHHOLDING
ALLOWANCES
(a) Deductions. ~ Additional withholding allowances may
be claimed by taxpayers expecting to have allowable itemized
deductions exceeding the standard deduction or alloyvable
adjustments to income. One For most taxy pavers, one
additional allowance may be claimed for each two thousand
five hundred dollars ($2,000) ($2.500) that the itemized
Reason for Proposed Action: 17 NCAC 7B .0104, .0206 -
Chapter 121 ( HB 136~) of the 1998 Session repealed the
annual wholesale license, effective July 1. 1998. and renamed
the required "license" as a "certificate of registration" to
match the terminology used by the Department. The
amendments to these rules reflect these changes.
1 7 \CAC 7B . 1301, . 1303 - These rules are amended to delete
a confusing reference to donees in .1301 and to clarify the
taxation of property delivered to out-of-state donees. Rule
13:9 NORTH CAROLINA REGISTER November 2, 1998 767
PROPOSED RULES
.1301 addesses purchasers and Rule .1303 addresses donees.
A donee is the recipient ofa gift.
17 NCAC 7B. 1602, .1905, .2101 - These rules are amended
to reflect changes made by SB 132" ofthe 199H Session. That
bill repeals the sales tax on piped natural gas effective July I.
1999.
Comment Procedures: Written comments may be submitted
to Mr. Tim Holmes at the North Carolina Department of
Revenue. Sales and Use Tax Division. PO Box 871, Raleigh.
NC 2 '602. Comments received will be taken into
consideration. If you have questions, you may call Mr
Holmes at (919) '33-2151.
CHAPTER 7 - SALES AND USE TAX
SUBCHAPTER 7B - STATE SALES AND USE TAX
SECTION .0100 - GENERAL PROVISIONS
.0104 RETURNS
(a) General. -- G.S. 105-164.16 establishes the filing
frequency of sales and use tax returns and the content of the
returns. G.S. 105-164.4(c) requires a retailer and a wholesale
merchant to register with the Department and obtain a l ic ense .
G.S. 105 164 .5(1) require s a whol esal e merchant to regi s t er
with th e
—
Departm ent and obtain a lic ense, certificate of
registration. G.S. 105-164.6 requires a retailer who delivers
property for storage, use. or consumption but does not have a
place of business in this State to register with the Department
and obtain a lic en se , certificate of registration. A person who
is engaged in business, is not otherwise required to file a sales
and use tax return, and. on two or more occasions within a
twelve-month period, purchases property subject to use tax
must register with the Department and begin filing sales and
use tax returns. A person who is engaged in business, is not
otherwise required to file a sales and use tax return, and
purchases property subject to use tax only once in a twelve-month
period must file a return and pay the tax due within 15
days after the end of the month in which the purchase was
made.
(b) Schedules. - A retailer who files an estimated return for
a semimonthlv reporting period that reports tax payable by
more than one location in the State must attach two schedules
to the return. One schedule must list the amount of State tax
due for each location in the State and the other must list the
amount of local tax due for each county.
(c) No Sales or Purchases Bv Business. — A retailer who
does not make any sales during a reporting period must file a
return for that period and mark '"no sales" on the return.
Similarly, a person who is not a retailer but is engaged in
business, purchases tangible personal property for the business
that is subject to use tax. and does not make am taxable
purchases during a reporting period must file a return for that
period and mark "no purchases" on the return.
(d) Seasonal Business. - A retailer who engages in business
for six or fewer consecutive months in each year may register
as a seasonal filer and indicate the months in which the retailer
engages in business. A retailer who is registered as a seasonal
filer is not required to file a return for an off-season reporting
period in which the retailer did not engage in business.
(e) Wholesale Merchant. — A person who engager
exclusively in the business of making wholesale sales is not^
required to file a return. A person who, on two or more
occasions within a twelve-month period, either makes taxable
sales to users, consumers, or nonregistered merchants or makes
purchases subject to use tax is not engaged exclusively in the
business of making wholesale sales and must begin filing sales
and use tax returns. A wholesale merchant who is not required
to file a sales and use tax return and who. on only one occasion
within a twelve-month period, either makes taxable sales to
users, consumers, or nonregistered merchants or makes
purchases subject to use tax must file a return and pay the tax
due within 15 days after the end of the month in which the sale
or purchase was made.
(f) Non-Business Use Tax. ~ An individual who is not
engaged in the business of selling tangible personal property at
retail and who purchases for a non-business purpose tangible
personal property that is subject to use tax must report the tax
due on Form E-554. The return is due annualK by the date set
under G.S. 105-164.16.
Authority G.S. 105-164.3; 105-164.16; 105-164.1'; 105-262.
SECTION .0200 - GENERAL APPLICATION OF
LAW TO MANUFACTURING AND
INDUSTRIAL PROCESSING .
.0206 SALES BY MANUFACTURERS
(a) Sales of tangible personal property by manufacturer s a
manufacturer to a registered retailer or a wholesale merchants
merchant in this stat e State for the purpose of resale are not
subject to sales or use tax provided jf the transactions are
supported by properly executed Certificates of Resale. Form
E-590.
(b) Sales of tangible personal property by manufacturers a
manufacturer to a nonresident retail or wholesale merchants
merchant for the purpose of resale in another state are not
subject to sales or use tax when even though the property is
delivered to such purchasers in this stat e provid ed State if the
nonresident retail or wholesale merchant is registered for sales
and use tax purposes in a taxing jurisdiction outside this state
State and the transactions are supported by properly executed
Certificates of Resale. Form E-590.
(c) Sales of tangible personal property by manufacture rs
who de liv er a manufacturer who delivers the property to
purchasers outside this state State or who de liv er delivers the
propertv to a common carrier or to the mails for delivery to the
purchase r purchasers at a point outside this state State are not
subject to sales or use tax. Such These sales must be
supported by the prescribed records.
(d) Sales of tangible personal property by manufacturers to
nonregistered merchants in this state State and sales to ,
nonregistered nonresident merchants who accept delivery of'
the property in this state State are subject to the sales or use
tax.
768 NORTH CAROLINA REGISTER November!, 1998 13:9
PROPOSED RULES
A trip sheet that is signed by the seller's delivery
agent and shows the signature and address of the
person who received the delivered goods outside the
state.
{e)—Manufacturers purchasing tangible personal property (3)
and reselling it in its same form to regi s tered merchants for
resale shall obtain an annual whol esale license. Manufacturers
maintaining a warehouse or other place of distribution in this
state, separate and apart from the place of manufacture , for th e
sale—ef
—
distribution—of their—manufactured—products—te Authority G.S. 105-164.13; 105-262.
registered merchants for the purpose of resal e shall obtain an
annual wholesal e license. Manufacturers who are required to
obtain the whol esale license are also liabl e for a merchants
certificate of registration license .
fft(e) Manufacturers who only make sales to registered
merchants for resale or sales which that are otherwise exempt
from the tax are not required to report such the sales to the
Department; however, manufacturers making taxable retail
sales or purchases subject to the use tax must register with the
Department and file sales and use tax reports reflecting such
the taxable sales or purchases and pay the applicable tax due
thereon.
(g-Hf) A manufacturer becomes liable for tax on its sales of
tangible personal property when it sells directly to users and
consumers, including employees. Such These sales include :
include aj| of the following:
(1) sales of bottled drinks by a bottling plant to users
and consumers, including employees: employees.
(2) sales to employees or other persons of food
products, meals meals, and other prepared foods by
an industrial plant or other business of any kind
through a commissary, concession stand, cafeteria,
lunch stand stand, or other similar places : place.
(3) sales of fuel, hosiery, furniture furniture, or any
other kind of taxable tangible persona! property to
employees or any other users or consumers.
fh-Kg) A manufacturer's casual or occasional sale of its
worn out. obsol ete obsolete, or surplus machinery, accessori e s
accessories, and similar items are not subject to the tax.
Authority G.S. 105-164.4;
105-164.28; 105-262.
105-164.6; 105-164.13;
SECTION .1300 - SALES IN INTERSTATE
COMMERCE
.1301 OUT-OF-STATE DELIVERIES
Sales within the state State of tangible personal property
that the vendor delivers to the purchaser at a point outside the
state. State, or that the vendor delivers to a common carrier or
to the mails for transportation and deliver}, to the purchaser ef
a donee at a point outside the state . State, are not subject to the
applicable state and local sales or use tax if the property is not
returned to a point within the stat e State and the vendor
furnishes acceptable proof of transportation to a point outside
the state . State. The most acceptable proof of transportation
and deliver) to a point outside the state State is any of the
following:
(1) A waybill or bill of lading made out to the seller's
order calling for deliver).
(2) An insurance or registry receipt issued by the United
States Postal Service, or a postal service or receipt.
.1303 DELIVERIES TO DONEES
Sales of printed material by vendors other than printer s and
sales of other taxable tangible personal property to any person
in North Carolina which such person provides without charge
to recipi ents, whether it be advertising materials or gift s or
donation s are subj ect to the four percent state tax and any
applicable local sal es or use tax even though the vendor
de liv ers the property to th e donee at a point outside this state
and without regard to whether such de livery is made by mail,
common carri er or otherwise.—Sales of taxable tangible
personal property delivered to a donee or any other user or
consumer in North Carolina are taxable.
A donee is a person to whom the buyer of tangible personal
property gives the property without charge. When a North
Carolina retailer sells tangible personal property to a resident
buyer and the retailer, at the direction of the buyer, delivers the
property to the buver's donee instead of to the buyer, the sale
by the retailer is subject to applicable State and local sales tax.
The tax applies regardless of whether the donee js located
inside or outside the State and regardless of whether the
delivery is made by mail, by common carrier, or by another
means .
When a North Carolina retailer sells tangible personal
property to a nonresident buver and the retailer, at the direction
of the buyer, delivers the property to the buver's donee instead
of to the buver. the sale by the retailer js subject to applicable
State and local sales tax only if the delivery to the donee js
made inside the State. If the delivery to the donee is made
outside the State, no State or local sales or use tax applies. A
retailer who, at the direction of a nonresident buver. delivers
property to the buver's donee at a point outside the State must
have acceptable proof of delivery m accordance with 17
NCAC7B .1301.
Authority G.S. 105-164.4; 105-164.6; 105-262.
SECTION .1600 - SALES TO OR BY HOSPITALS:
EDUCATIONAL: CHARITABLE OR
RELIGIOUS INSTITUTIONS: ETC.:
AND REFUNDS THERETO
.1602 REFUNDS TO NONPROFIT ENTITIES AND
MEDICINES AND DRUGS PURCHASED BY
HOSPITALS
(a) The refund provisions contained in this Rule do not
apply to the tax on taxable sales by the nonprofit entities
named in G.S. 105- 164. 14(b) and no part thereof shall be
refunded or claimed as a refund. Nonprofit entities registered
for sales and use tax purposes may purchase the tangible
personal property which they resell without paying tax thereon
to their suppliers provided they have furnished such suppliers
13:9 NORTH CAROLINA REGISTER November 2, 1998 769
PROPOSED RULES
with properly executed Certificates of Resale. Form E-590.
Certificates of resale may not be used by any nonprofit entity
in making purchases of tangible personal property to be used
or consumed by such purchaser.
(b) All refund claims shall be substantiated by proper
documentary proof and only the taxes actually paid by the
claimant during the period for which the claim for refund is
filed may be included in the claim. Any local sales or use
taxes included in the claim shall be separately stated in the
claim for refund. In cases where more than one county's tax
has been paid, a breakdown shall be attached to the claim
showing the amount of each county's local tax separately.
(c) As to taxes paid on the claimant's purchases for use.
other than those made by contractors performing work for the
claimant, invoices or copies of invoices showing the property
purchased, the cost thereof, the date of purchase and the
amount of state and local sales or use tax paid during the
refund period shall constitute proper documentary proof.
(d) To substantiate a refund claim for sales or use taxes paid
on purchases of building materials, supplies, fixtures and
equipment by its contractor, the claimant shall secure from
such contractor certified statements setting forth the cost of the
property purchased from each vendor and the amount of state
and local sales or use taxes paid thereon. In the event the
contractor makes several purchases from the same vendor,
such certified statement shall indicate the invoice numbers, the
inclusive dates of the invoices, the total amount of the inv 'ces
and the sales and use taxes paid thereon. Such statement shall
also include the cost of any tangible personal property
withdrawn from the contractor's warehouse stock and the
amount of state and local sales or use tax paid thereon by the
contractor. Similar certified statements by his subcontractors
shall be obtained by the general contractor and furnished to the
claimant. Any local sales or use taxes included in the
contractor's statements shall be shown separately from the state
sales or use taxes. The contractor's statements shall not
contain sales or use taxes paid on purchases of tangible
personal property by such contractors for use in performing the
contract which does not annex to. affix to or in some manner
become a part of the building or structure being erected,
altered or repaired which is owned or leased by a nonprofit
entity for use by a nonprofit entity named in G.S. 105-
164.14(b) for carrying on its nonprofit activities. Examples of
property on which sales or use tax has been paid by the
contractor and which shall not be included in the contractor's
statement are scaffolding, forms for concrete, fuel for the
operation of machinery and equipment, tools, equipment repair
parts, equipment rentals and blueprints.
(e) The refund provisions set forth in this Rule apply only
to the nonprofit entities described in G.S. 1 05- 164. 14(b). but
do not apply to nonprofit fraternal, civic or patriotic
organizations, notwithstanding that such organizations may
perform certain charitable functions. The refund provisions
set forth in this Rule do not apply to nonprofit entities which
are owned and controlled by the United States, the state or a
unit of local government except hospitals and medical
accommodations created under the Hospital Authorities Law.
Article 2 of Chapter 13 IE of the General Statutes and
nonprofit hospitals owned and controlled by a unit of local
government that elect to receive semiannual refunds under
G.S. 105-164. 14(b) instead of annual refunds under G.S.
105- 164. 14(c). Any nonprofit hospital owned and controller
by a unit of local government may submit a written request to
receive semiannual refunds under G.S. 105-164. 14(b) instead
of annual refunds under G.S. 105-164. 14(c). The request shall
be effective beginning with the six-months refund period
following the date of the request and applies to sales or use
taxes paid on or after the first day of the refund period for
which the request is effective.
(f) The refund provisions of this Rule do not apply to sales
taxes incurred by employees on purchases of food, lodging, or
other taxable travel expenses paid by employees and
reimbursed by a nonprofit entity listed in G.S. 105-164. 14(b).
These expenses are personal to the employee because the
contract for food, shelter, and travel is between the employee
and the provider and payment of the tax is by the employee
individually and personally. In this circumstance, a nonprofit
entity has not incurred any sales tax liability and has not paid
any sales tax: instead: it has chosen to reimburse a personal
expense of the employee. The refund provisions of this Rule
do not apply to any of the following:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Charges by a utility for e l ectricity, piped natural gas.
electricity and local. toll. or private
telecommunications services.
Occupancy taxes levied and administered by certain
counties and cities in this state.
Prepared food and beverage taxes levied by various^
local governments in this state. B,
Highway use taxes paid on the purchase, lease, or
rental of motor vehicles.
The white goods disposal tax levied on new white
goods.
The scrap tire disposal tax levied on new tires.
The dry-cleaning solvent tax levied on dry-cleaning
solvent purchased by a dry cleaning facility.
Authority G.S. 105-164.14; 105-262; 105-264.
SECTION .1900 - TIRE RECAPPERS AND
RETREADERS: TIRE AND TUBE REPAIRS
.1905 SALES TO TIRE RECAPPERS
(a) Sales to tire recappers of camelback or other rubber
products, cement and rubber solvent, cord fabric, wheel
weights and other items of a similar nature which enter into or
become an ingredient or component part of the recapped tires
or are attached to and delivered with the tires to the customer
are exempt from tax.
(b) The gross receipts derived by a utility from sales of
electricity and piped natural gas to tire recappers for use in
connection with the operation of the recapping plant are
subject to th e three pe rc ent stat e rat e of ta.X T to tax at the rate
set in G.S. 105-164.4. Sales of other -feel fuel, except piped M
natural gas, to tire recappers for use in connection with the ^
operation of the recapping plant are subject to the one percent
rate of tax. Sales of piped natural gas are exempt from sales
770 XORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
tax and are subject to the excise tax imposed by Article 5_E of
G.S. 105.
(c) Sales to tire recappers of mill machinery, or parts and
accessories therefor, for use exclusively in the recapping
process are subject to the one percent rate of tax, with a
maximum tax of eighty dollars ($80.00) per article. Sales to
contractors and subcontractors of mill machinery or mill
machinery parts and accessories for use by them in the
performance of contracts with manufacturing industries and
plants and sales to subcontractors purchasing mill machinery
or mill machinery parts and accessories for use by them in the
performance of contracts encompassed in such contracts with
manufacturing industries and plants are subject to a one
percent rate of tax, with a maximum tax of eighty dollars
($80.00) per article where applicable. Such mill machinery or
mill machinery parts and accessories must be for use by tire
recappers in the production process, as the term "production"
is defined in 17 NCAC 7B .0202(a)(1). to qualify for the one
percent rate of tax with a maximum tax of eighty dollars
($80.00) per article when purchased by such contractors or
subcontractors. Contractors and subcontractors may obtain
Contractor's and Subcontractor's Certificate. Form E-580, from
the Office Services Division, Taxpayer Assistance Section,
North Carolina Department of Revenue, to be executed by
them and furnished to their vendors in connection with such
purchases as the vendor's authority to apply the one percent
rate of tax thereto. The following items when sold to tire
recappers for use exclusively in the recapping process are
considered to be mill machinery or mill machinery parts and
accessories within the meaning of the Sales and Use Tax
Article:
wire brushes;
mold lube;
curing tubes and rims;
molds and matrices;
buffing equipment;
buffing discs;
buffing rasps;
rasp teeth;
crayons for marking tires;
tire trimmers;
boilers:
tire handling equipment used exclusively between
the beginning and ending steps of the recapping
process:
inspection spreaders used exclusively to inspect
casings being recapped;
spinners used for applying cement used on casings
being recapped;
pre-condensing tanks for air lines used for applying
cement, dusting buffed casings, and inflating curing
tubes;
casing balancers used exclusively in balancing
casings to be recapped;
tread builders used to apply tread rubber to casings
being recapped;
air compressors used exclusively in retreading or
recapping process:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19) dust collectors;
(20) knives, stitchers, rollers, shears, awls, and splicing
tools used to perform work on the ingredient
material or the manufactured product;
(21) thermometers, pyrometers, and durometers used in
testing mold heat and cure hardness of the rubber
used in the recapping process;
(22) bagging and debagging equipment;
(23) sprayers used exclusively in the recapping process;
(24) matrix loaders;
(25) steam traps and valves used in steam lines for curing
molds;
(26) mold cleaners.
(d) The following are examples of items which are subject
to the four percent state tax and any applicable local sales or
use tax when sold to tire recappers for use or consumption:
( 1
)
motor vehicle jacks:
(2) tire tools not used between the beginning and ending
recapping processes;
(3) balancing machinery used after recapping process is
completed;
(4) equipment used to remove tires from the rim before
the recapping process begins;
(5) administrative equipment such as office supplies,
file cabinets and other office equipment;
(6) cleaning compounds for janitorial and sanitary
purposes;
(7) uniforms for employees;
(8) advertising materials;
(9) lubricants, repair parts and accessories for motor
vehicles;
(10) inspection bags;
(11) gloves.
(e) The lists in Paragraphs (c) and (d) of this Rule are not
intended to be exclusive but are for illustrative purposes only.
If there is any question as to the tax status of any item not on
the lists, it may be submitted to the Secretary of Revenue for a
determination as to the applicable rate of tax.
Authority G.S. 105-164.4; 105-164.6; 105-262; 105-264.
SECTION .2100- ELECTRICITY: PIPED NATURAL
GAS: BOTTLED GAS: COAL: COKE: FUEL OIL:
OXYGEN: ACETYLENE: HYDROGEN: LIQUEFIED
PETROLEUM GAS AND OTHER COMBUSTIBLES
.2101 ELECTRICITY AND OTHER FUEL
fa)
—
Sal es of bottl ed gas. coal. coke, fu e l oil. oxygen,
acetyl ene .—hydrogen,—
l
iquefied—petrol eum—gas;—er-
—
othe r
combustibl es to users or con sumers are subj ect to the four
percent stat e tax and any applicable local rate of sal es or use
tax except those sales exempt from tax under G.S. 105 161.13
and those sal es subj ect to a low er rate of tax unde r G.S.
105 164 . 4 . The gross receipts de rived by a uti l ity from s al es
of el ectricity and piped natura l gas to users are subj ect to Stat e
tax^ -the- -pep ion to whom th e
—
The tax rate depend s
e l e ctricity or piped natural gas i s sold and the purpose for
wh i ch it will be used.—Gros s rec e ipts de riv ed from s al es of
J3:9 NORTH CAROLINA REGISTER November 2, 1998 771
PROPOSED RULES
el ectricity or piped natural gas to farmers, manufacturers,
laundri e s, and dry cl ean e rs for on e of th e purpose s describ ed
in G.S. 105 16 1 . 1 (a)(lf) are s ubj ect to Stat e sal es tax at th e
rat e of 2. 8 3 perc ent.—All other gro s s re ce ipts from sal e s of
electricity are subject to State sa l es tax at th e rate of 3 pe rc ent.
The gross receipt s deri ved by a utility from sal e s of e l e ctricity
and piped natural gas are not subj ect to the local s al es or use
derived from the s al e of el ectricity b\ a
is a fed eral agency and who i s required by contract with that
federal agency to make payment s in lieu of tax es are not
subj e ct to tax.—Sales to a small power production facility of
fu e l for u se by th e facility to gen e rat e e l octricity are ex empt
from sal es or use tax.
(h)
—
The gross rec e ipts de ri\ ed b> a utility from sal es of
piped natural gas are subj e ct to tax at th e applicable rate . The
tax is to be added as a separat e it em to th e charge s for piped
natural gas.—Gross re c e ipts upon which th e tax is due is th e
total amount for which the piped natural gas i s sold, including
any charges for s en ic e s that go into th e production or de liv e ry
of th e gas and that are a part of the sale valued in money.
whether paid in money or oth erwise , and including any amount
for which cre dit is given to th e purchase r by th e s e ll e r without
any deduction on account of th e cost of gas sold, the cost of
mate rials use d, l abor or service costs, int e rest charge d, loss e s,
or any other expense whatsoe v er.—Th e re fore all charges for
tangible personal—prope rty—and
—
s en ic e s—p vided—m—the
production and de liv ery of gas to th e purchaser are a part o f
th e sal e of piped natural gas upon which the tax i s due
notwith standing that some charges may be bill ed s eparat e ly to
th e customer for th e met e red s en ic e .
The following list de scrib e s specific charges for piped natural
gas and stat e s wheth e r th e charge s are taxabl e gross re c e ipts:
f-H A utility must report rec e ipts from sal e s of piped
natural gas on an accrual bas is. The applicabl e tax
must be s eparately—
s
tated on th e bill to each
custom er. A sal e by a uti l ity of piped natural gas is
considered to accrue when the utilitv bi -the
cu stomer for the sal e . The applicabl e tax is du e on
gross rec e ipts de riv ed from th e sal e of piped natural
gas without any d eduction for any franchise tax th at
is du e .—The re c e ipts must be re fl e ct ed on th e
Utilit i es and Municipaliti e s Sal e s Tax Re port. Form
E 500E. which is to be fil ed monthly on or before
th e dat e s et in G.S. 105 161.16(c).
(33- S e rvic e charges to customers when th e company
first suppli es gas unde r any applicabl e rat e schedule
are a part of gross rec e ipts from sal es of gas subject
to tax
(3} The amounts actually—charged to custome r s for
piped natural gas consumed for th e billing pe riod are
th e amount s on which th e tax is du e and tax i s to be
charged notwithstanding that th e custome r s may be
und er equal pay agreements.
(44 Charges for reconn ecting s en ic e to custome rs aft er electricity
{$) Sales of piped natural gas to a manufacturer that
ent e rs into or become s, an ingredient or component
part of th e manufactured product are exempt from
s al e s tax. m
{&) Sal es of piped natural gas dire ctly to the UnitecT
Stat e s Governme nt or any agency thereof are not
s ubj ect to s al e s tax.—In order to be a s al e to th e
United—Stat e s—Governme nt.—th«
—
Government—ef
agency involv ed must make th e purchase of piped
natural gas and pay—dire ctly to the vendor the
purchase pric e of the piped natural gas.—Whil e a
utility' s—sales
—
dire ctly—ie—the
—
United—Stat e s
Governme nt or an agency th e reof are exempt from
s al es tax. a utility must obtain a purchase requisition
on e time from each agency for its records.
(7-) Sales of piped natural gas to regist ered utility
companie s for resal e are ex empt from sal e s tax
when th e sal es are supported by properly completed
Ce rtificate s of Re sal e . Form E - 500.
{&) Energy audit amounts charged to custom ers for a
comprehensive en ergy audit provided by a utility are
not a part of gross rec e ipts from sal es of piped
natural gas subj e ct to s al es tax.
{$) Late payment charges bill ed on a balance that was
not paid on th e previous month's bill are not a part
of gross rec e ipts of sal es of piped natural gas subj ect
to sal es tax.
-(4-6-* Return check charge s for checks re c e iv ed by a utility
in payment of an account and returned by th e bank
^
because of insuffici ent funds are not a part of gros d
re c e ipts from th e sal e of piped natural gas subject to
sal e s tax.
(444 Accounts of purchasers repre s enting taxabl e sal e s
on which th e sa le s tax has been paid that are found
to be worthl e ss and are actually charged off for
incom e tax purposes may. at corresponding periods.
be deducte d from gross sal es.—Any amount that is
deducted and subseque ntly coll ected mus t be added
to gross sal e s.
-(45-) Local sal e s tax e s do not apply to gross rec e ipts
derived by a utility from sal es of e l e ctricity.—Local
sal e s taxe s apply to rec e ipts from sal es and l e as e s of
tangibl e personal property that are subj ect to th e
four perc ent stat e rat e of tax.
fe-)
—
Sal e s of fu e l, oth e r than e l e ctricity and piped natural
gas. for re sid e ntial h eating purposes are s ubj e ct to th e four
pe rc e nt stat e tax and any applicabl e local sal e s or use tax.
Sal e s of coal in it s original stat e are ex empt from tax whe n th e
sales are made by th e producer, or th e producer's age nt, in th e
capacity—of a produce r and th e coal is de liv ered to th e
purchaser directly from th e min e .
(a) Electricity — Electricity is tangible personal property
and jts sale is subject to tax at the rates set ]n G.S. 105-164.4.
Local sales and use taxes do not apply to sales or purchases of
servic e has been terminat ed for nonpayme nt are a
part of gro ss rec e ipts from sal e s of piped natural gas
subj e ct to s al e s tax.
(b) Other Fuel. ~ Sales of bottled gas, coal, coke, fuel oil.^|
oxygen, acerv lene. hydrogen, liquefied petroleum gas, or other
combustibles to u sers or cons umers are subject to the four
"2 SORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
percent State tax and the 2% local tax unless they are exempt
from tax under G.S. 105-164.13 or subject to a lower rate of
tax under G.S. 105-164.4. Sales of piped natural gas are
exempt from sales tax and are subject to the excise tax
imposed by Article 5E of G.S. 105.
Authority- G.S. 105-164.4; 105-164.6; 105-164.13: 105-
164.16; '105-262.
TITLE 25 - OFFICE OF STATE PERSONNEL
Notice is hereby given in accordance with G.S. 150B-21.2
that State Personnel Commission the intends to adopt the
rules cited as 25 NCAC IB .0354: U .0512; and amend the
rules cited as 25 NCAC IB .0431 1H .0602, .0605-. 0606; U
.0503. .0603. Notice of Rule-making Proceedings was
published in the Register on September I. 1998.
Proposed Effective Date: July 1. 1999
A Public Hearing will be conducted at 10:00 a.m. on
December 3. 1998 at the Administration Building. 3
rd
Floor.
Raleigh. NC.
Reason for Proposed Action: The Office of State Personnel
administers personnel regulations for dozens ofstate agencies
employing thousands ofstate employees and their supervisors.
Recruitment and selection procedures and grievance
procedures are referred to every day in dozens of situations.
Adherence to the notice and hearing requirements for the
adoption ofproposed rules submitted would potentially delay
or defeat justice in grievance situations and would leave
managers without rules to aid them in the proper
implementation of this statute in the recruitment and selection
process.
Comment Procedures: Interested persons may present
statements orally at the public hearing or in writing by mail
addressed to Delores J. Stanley. Office ofState Personnel. 116
West Jones Street. Raleigh. NC 2 7603.
Fiscal Note: These Rules do not affect the expenditures or
revenues of state or local government funds. These Rules do
not have a substantial economic impact ofat least five million
dollars (S 5. 000.000) in a 12-month period.
CHAPTER 1 - OFFICE OF STATE PERSONNEL
SUBCHAPTER 1 B - STATE PERSONNEL
COMMISSION
SECTION .0300 CONTESTED CASE HEARING
PROCEDURE
.0354 TIME FRAME FOR RAISING ALLEGATION
OF VIOLATION OF G.S. 126-14.2
Allegations of a violation of G.S. 126-14.2 must be raised in
a complaint to the Civil Rights Division of the Office of
Administrative Hearings (OAH-CRD) within 30 days after the
employee or applicant for initial employment receives written
notice that a position for which the employee or applicant
applied was filled. After an initial determination by the OAH-CRD
that there is probable cause to believe that there has been
a violation of G.S. 126-14.2. the employee or applicant must
file a contested case petition pursuant to G.S. 126-14.2 and
Article 3 of G.S. 150B within 15 days.
Authority G.S. 126-14.2.
SECTION .0400 - APPEAL TO COMMISSION
.0437 APPEAL TO THE STATE PERSONNEL
COMMISSION: PROCEDURES
(a) The State Personnel Commission shall receive the
record in the contested case forwarded by the Office of
Administrative Hearings and make a final administrative
decision in the case. The Office of State Personnel shall be
responsible for the administrative management of contested
cases coming before the Commission for its review and
decision.
(b) Oral Argument. Either party to a contested case may
request the opportunity to appear before the State Personnel
Commission and make oral argument, argument jn al] cases
except those arising under G.S. 126-14.4. Such arguments
shall be based solely on the information contained in the
record submitted by the OAH. Oral arguments shall be
requested in writing no more than 4-5 j_0 calendar days after
notice of review by the Commission has been sent to the
parti es , parties that the Commission has received the official
record from the OAH in the contested case. After 30 calendar
davs have passed since the notice to the parties that the official
record has been received by the Commission, the Commission
shall send a The notice of review which shall contain the date,
time and place of the Commission meeting at which the case
shall be reviewed. If a party fails to request oral argument in a
timely fashion, that party may not be allowed to present oral
argument. Each party requesting oral argument shall be
allotted a maximum of 44 JO minutes for the presentation.
presentation, unless the time period is extended by a vote of
the Commission. All requests to speak for more than 10
minutes shall be made jn writing in the same document which
requests the opportunity to make oral argument. The party
which did not prevail before the Administrative Law Judge is
entitled to make the first oral argument and to present a
rebuttal. if both parties are seeking changes in the
Administrative Law Judge's recommended decision, both
parties may present a rebuttal and the party with the burden of
proof in the contested case is entitled to the last rebuttal.
(c) Briefs. Legal Memoranda. Attorney's Fees Requests. All
briefs and legal memoranda in cases other than those arising
under G.S. 126-14.4 shall be received by the Office of State
Personnel no later than 4-0 working 30 calendar days prior to
th e date of th e Commission meeting for which a case is
sch edul ed for revi ew after the date of the notice sent bv the
13:9 NORTH CAROLINA REGISTER November 2, 1998 773
PROPOSED RULES
Commission notifying the parties of the Commission's receipt be granted by the Administrator for good
of the official record from the QAH. Such documents shall
also be served upon the opposing party. Such a document
received after the deadline shall be presented to the
Commission only after the party has shown that the opposing
party was served with the document at l ea s t 10 work i ng days
before the Commiss ion meeting, no later than 30 calendar davs
after the date of the notice sent by the Commission notifying
the parties of the Commission's receipt of the official record
from the QAH. Attorney's Fees fees Request s requests must
be presented to the Commission by the prevailing party to a
Commission Decision and Order at least one month before the
meeting at which the matter is to be considered. Such requests
must also be served upon the opposing party The
Commission will notify the parties upon the receipt of a
request for attorneys fees and provide an opportunity for the
opposing party to file objections to the fees requested. If the
parties wish to make oral argument on an attorney's fees
request, a request for oral argument must be received by the
Office of State Personnel within two weeks after the filing of
the attorney's fees request and at least one month prior to the
meeting at which such oral argument js requested. An
extension of time to file documents with the Commission ma\ to file documents with the Commission ma\ be granted b\ the
Commission ma\
cause shown.
(e) Proposed Decision and Order. Each party to a contested
case shall submit a proposed Decision and Order I'M
consideration by the Commission in that case. The proposes
Decision and Order shall be received by the Office of State
Personnel no later than 1 working days prior to th e dat e of the
Commi ssion meeting for which a ca se is scheduled for revi ew.
30 calendar davs after the date of the notice sent by the
Commission notifying the parties of the Commission's receipt
of the official record from the QAH. The Commission may
delay decision in a case until all parties have all parties have
submitted a proposed Decision and Order. The proposed
Decision and Order shall indicate which findings, conclusions,
and recommendations of the Administrative Law Judge are
being deleted or amended and why. and what new findings,
and conclusions are being adopted. The proposed Decision and
Order shall contain an order in the case for the signature of the
Administrator to the Commission, consistent with and
supported by the findings and conclusions. Parties shall
submit 4-0 20 copies of each pleading (with three holes in the
left margin) filed with the Commission. An extension of time
be granted bv the Administrator for good cause shown.
(d) Written Exceptions. Proposed Alternative Findings.
Conclusions and Recommendations. Each part) shall submit
written exceptions to the recon 'ended decision of the
Administrative Law Judge, unless the party accepts the
recommended decision in its entirety. Any party may choose
to submit proposed alternative findings of fact and conclusions
of law. Exceptions and alternative findings and conclusions
shall be received by the Office of State Personnel no later than
10 working day s prior to the dat e of the Commission for which
a case i s schedul ed for review. 30 calendar davs after the date
of the notice sent by the Commission notifying the parties of
the Commission's receipt of the official record from the QAH.
Written exceptions shall be specifically drawn. Exceptions
shall indicate which finding, conclusion, or recommendation is
being excepted to and the basis for the exception being taken.
Reference must be made to the transcript (and volumes, where
applicable), if the transcript of the hearing was made. Where a
part) excepts to a finding, conclusion, or recommendation and
requests its deletion or amendment, an alternative finding,
conclusion, or recommendation shall be made. Such a
document received after the deadline shall be presented to the
Commission only after the parry has shown that the opposing
party was served with the document at l east 10 working day s
be fore th e Commission meeting, no later than 30 calendar davs
after the date of the notice sent bv the Commission notifying the official record from the Office of Administrative Hearings.
the parties of the Commission's receipt of the official record
from the QAH. The Commission shall have the authority to
adopt the findings of fact and conclusions of the
Administrative Law Judge, or to amend the same, or to adopt
alternative findings of fact and conclusions of law. either from
those submitted by the parties or drawn from its own review of
the whole record. Parties shall submit 4-0 20 copies of each
pleading (with three holes in the left margin) filed with the
Commission. An extension of time to file documents w ith the
Administrator for good cause shown.
(f) Service on Opposing Parties. Copies of all documents
required by this Rule shall be served on the opposing party,
but no later than 1 working days prior to th e date of the
Commission meeting for which a case is schedul ed for re vi ew.
30 calendar davs after the date of the notice sent by the^.
Commission notifying the parties of the Commission's receirjB ;
of the official record from the QAH.
(g) Notification. The parties or when applicable, the legal
representative of record for a parry, shall be notified, by
certified mail, return receipt requested, of the Commission's
decision. The Commission's decision shall be prepared and
sent out by the Office of State Personnel. Copies or the content
of a specific decision and order shall not be released to non-parties
until the Office of State Personnel has knowledge that
all parties have received a copy of the Decision and Order.
(h) Cases arising under G.S. 126-14.4. in contested cases
arising under G.S. 126-14.4. where the Commission is
required to make a decision within 60 davs of receipt of the
official record, the parties shall not be entitled to appear m
person before the Commission and make oral argument.
Instead, either party may request an opportunity to make oral
argument to the Commission jn a teleconference (or by other
video or audio electronic conferencing means) within 10
calendar davs of notice bv the Commission that it has received
If a party requests the opportunity to present oral argument ]n a
teleconference, a teleconference shall be scheduled by the
Office of State Personnel and a Notice of Rev jew via Tele-conference
shall be sent to the parties which shall contain the
date and time the teleconference will take place and the
telephone numbers at which the parties will be called. N
delays in scheduling the teleconference will be permitte
Ntm
tgdB
which would prejudice the Commission's ability to render its
w ritten decision |n compliance with the statutory 60-dav
774 \ORTH CAROL1\A REGISTER November 2, 1998 13:9
PROPOSED RULES
deadline. Any briefs or legal memoranda which the parties
wish to submit must be received by the Office of State
Personnel no later than 14 calendar days after notice that the
Commission has received the official record from the Office of
Administrative Hearings. An extension of time to file
documents with the Commission may be granted by the
Administrator for good cause shown. Each party requesting
oral argument shall be allotted a maximum of J_0 minutes for
the presentation, unless the time period is extended by a vote
of the Commission. All requests to speak for more than 10
minutes shall be made in writing ]n the same document which
requests the opportunity to make oral argument. The parts
which did not prevail before the Administrative Law Judge is
entitled to make the first oral argument and to present a
rebuttal. If both parties are seeking changes m the
Administrative Law Judge's recommended decision, both
parties may present a rebuttal and the party with the burden of
proof in the contested case is entitled to the last rebuttal.
Authority G.S. 126-4.
SUBCHAPTER 1H - RECRUITMENT AND
SELECTION
SECTION .0600 - GENERAL PROVISIONS
.0602 POSTING AND ANNOUNCEMENT OF
VACANCIES
(a) All agencies shall select from the most qualified persons
to fin vacant positions. Employment shall be offered based
upon the job-related qualifications of applicants for
employment using fair and valid selection criteria 2nd not on
political affiliation or political influence. For purposes of this
policy, "political affiliation" is the membership in,
participation in. or support of. a particular political party,
group, or candidate; "political influence" occurs when political
affiliation impacts the decision to hire or not to hire and the
selection decision was not based on fair and valid selection
criteria.
fa-Hb) Vacant positions to be filled in state government shall
be publicized by the agency having the vacancy to permit an
open opportunity for all interested employees and applicants to
apply. The term "agency" as used in this Paragraph includes all
state departments, institutions, commissions, and boards. The
recruitment and selection process shall be consistently applied,
non-discriminatorv and promote open and fail competition and
the hiring of a diverse workforce.
fb)(c) Vacancies which shall be filled from within the
agency workforce shall have an application period of not less
than five working days and shall be prominently posted in at
least the following locations:
( 1
)
The personnel office of the agenc\ having the
vacancy: and
(2) The particular work unit of the agency having the
vacancy.
fe-Md) If the decision is made, initially or at any time a
vacancy remains open, to receive applicants from within the
overall state government workforce, that vacancy shall be
listed with the Office of State Personnel for the purpose of
informing current state employees of the opening. Such
vacancies shall have an application period of not less than
seven working days from the time the listing is received by the
Office of State Personnel. Each vacancy for internal posting
or listing with the Office of State Personnel will be described
in an announcement which includes at minimum the position
number, title, salary range, key duties, essential functions,
knowledge and skill requirements, minimum education training
and experience standard, the application period and the
appropriate contact person. Each vacancy listing must include
a closing date unless the classification has been determined as
critical. Factors used in determining critical classifications
shall include: agency turnover; number of positions in class;
geographic location; scarcity of skills; safety, health or quality
of care for clients. Such critical classifications, which will not
require closing dates on vacancy postings, shall be approved
by the State Personnel Commission. On those classes
determined to be critical, which are considered open,
continuous postings, agencies shall determine how long
applications will be considered active. Posting requirements
shall not apply to:
( 1
)
Vacancies which must be used to meet management
necessity, for which an agency will not openly
recruit. Examples include vacancies committed to a
budget reduction, vacancies used for disciplinary
transfers or demotions, use of an existing vacancy to
avoid reduction in force, and transfer of an
employee to an existing opening to avoid the threat
of bodily harm, harm, and th e promotion of an
empl oyee into an opening under a formal, pre
existing "understudy arrangement" .
(2) Vacancies for positions which have been designated
po l icy making exempt policy-making under G.S.
126-5(d).
(3) Vacancies which must be filled immediately to
prevent work stoppage in constant demand
situations, or to protect the public health, safety, or
security.
(44 Vacancies which are not fi l led by open recruitment,
but rather by specific and target ed recruitment of
special groups for th e Mode l Cooperative Education
and stat e governme nt intern programs.
f§-)(4) Vacancies for positions to be filled by chief deputies
and chief administrative assistants to elected or
appointed department heads; and vacancies for
positions to be filled by confidential assistants and
confidential secretaries to elected or appointed
department heads, chief deputies, or chief
administrative assistants. The decision to exercise a
vacancy posting exception based upon Paragraphs
(b)£d)(l) and (3) of this Rule shall be the
responsibility of the agency head. The Office of
State Personnel is available upon request to provide
counsel and guidance in instances of uncertainty.
13:9 NORTH CAROLINA REGISTER November 2, 1998 775
PROPOSED RULES
fd-He) Any vacancy for which an agency wishes to consider
outside applicants or outside applicants concurrently with the
state government work force shall be listed simultaneously
with the appropriate Employment Security Commission office,
as required by G.S. 96-29, and with the Employment Practices
and Priorities Divi s ion Section of the Office of State
Personnel. Listings will include the appropriate announcement
information and vacancies so listed shall have an application
period of not less than seven work days.
fe4(f) If an agency makes an initial effort to fill a vacancy
from within the state government work force only, and is
unsuccessful, the listing with the Employment Security
Commission would take place when a decision is made to
recruit outside. A vacancy which an agency will not fill for
any reason should not be listed; if conditions change, it should
then be treated as a new vacancy.
ft-Mg) The Office of State Personnel may withhold approval
for an agency to fill a job vacancy if the agency cannot prove
to the satisfaction of the Office of State Personnel that it
complied with these posting requirements. If any agency hires
any person in violation of these posting requirements, and it is
determined by the Office of State Personnel that the
employment of the person hired must be discontinued as a
result of the posting violation, the agency shall pay such
person for the work performed during the period of time
between his her initial employment and separation.
fg-Hh) When a vac icy is listed with the Employment
Security Commission, the listing agency may not fill the job
opening for at least 2 1 days after the listing has been filed and
the local office with which the listing is made shall be notified
by the agency within 15 days after the vacancy is filled. Upon
agency request the Employment Security Commission may
waive the waiting period for filling listed vacancies in job
classifications for which the State Personnel Commission has
recognized candidates are in short supply if it hinders the
agency in providing essential services.
Authority G.S. 96-29: 126-4(4): 126-5(d); 126-7.1.
.0605 SPECIAL APPLICANT CONSIDERATIONS:
AGENCY RESPONSIBILITIES
(a) Priority Reemployment Consideration. State employees:
( 1
)
who have received notification of imminent
separation due to reduction in force: or
(2) who have been removed from a policy
mak i ngs confidential exempt positions, for reasons
other than cause cause, or who have been removed
from managerial exempt positions for reasons other
than cause but not for a violation of G.S. 126-14.2;
oi
(3) who have been removed from an exempt managerial
position for a violation of G.S. 126-14.2;
are afforded priority reemployment consideration under the
State Personnel Act. A list of all classes having applicants
with priority status will be sent to all agencies by the Office of
State Personnel and will be updated frequently. When a
vacancy occurs, the appointing authority must review the latest
list before initiating am recruiting efforts. If the classification
of the vacancy appears, a priority certificate must be requested
and the appropriate priority afforded. While in most instances
priority applicants will be on a priority certificate for classes of
their principal qualification, these applicants are free to applw
for any vacancy of their choice. If determined qualified,
regardless of whether they are currently on a priority certificate
for the class of the vacancy, the priority must be afforded.
(b) Veteran's Preference. State law requires that
employment preference be given to veterans, widows of
veterans, and wives of disabled veterans. Persons entitled to
such preference must so indicate on any application filed.
Verifying documentation may be required by the agency if
desirable.
(c) Age Limitations.
(1) Minimum Age - The minimum employment age is
18. Exceptions are provided under the law if the
employing agency procures an Employment
Certificate from the County Social Services
Department.
(2) Law Enforcement Officers - Law enforcement
officers must be at least 2 1 years of age.
(3) Maximum Age - There is no maximum age for
employment.
(d) Employment of Relatives. Members of an immediate
family shall not be employed within the same agency if such
employment will result in one member supervising another
member of his immediate family, or if one member will occupy
a position which requires influence over another member's
employment, promotion, salary administration and other^
related management or personnel considerations. The intent of^/
this provision is to avoid an employment relationship which
would create problems within a work unit or offend the public
sense of equal opportunity. The term immediate family
includes wife, husband, mother, father, brother, sister, son,
daughter. grandmother. grandfather. grandson and
granddaughter. Also included are the step-, half- and in-law
relationships based on the listing in this Paragraph. It might
also include others living within the same household or
otherwise so closely identified with each other as to suggest
difficulty.
Authority G.S. 126-4(4): 128-15.
.0606 SELECTION OF APPLICANTS
(a) The selection of applicants for vacant positions will be
based upon a relative consideration of their qualifications for
the position to be filled. Using fair and valid selection criteria,
the agency will review the credentials of each applicant and
determine who possesses the minimum qualifications. From
those applicants who meet the minimum qualifications, a pool
of the most qualified candidates shall be identified. The pool
of the most qualified candidates shall be those individuals
determined to be substantially more qualified than other
applicants. The individual selected for the position must be
chosen from the pool of the most qualified applicants. Ini
making the determination of minimally qualified and most'
qualified, policies regarding pri ority consideration must be
applied. Advantage will be given to applicants determined to
776 SORTH CAROLINA REGISTER November:, 1998 13:9
PROPOSED RULES
be most qualified and hiring authorities must reasonably
document hiring decisions to verify this advantage was granted
and explain their basis for selection.
(b) Selection procedures and methods will be validly related
to the duties and responsibilities of the vacancy to be filled.
The Office of State Personnel will provide technical
assistance, upon request, to agencies wishing to design or
review selection procedures.
(c) After making the selection decision, the agency shall
provide timely written notice of non-selection of all
unsuccessful candidates in the most qualified pool-
Id) Each agenc\ shall develop a written Recruitment and
Selection Plan according to guidelines provided by the Office
of State Personnel. The Recruitment and Selection Plan
should meet the particular needs of the agency and provide
assurances to employees and applicants that the recruitment
and selection process will be based on fair and valid selection
criteria. Agency Recruitment and Selection Plans shall be
submitted to the Office of State Personnel for review and
approval by the State Personnel Commission. Anv changes or
additions to agency Recruitment and Selection Plans shall also
be submitted to the Office of State Personnel for review and
approval by the State Personnel Commission. Those agencies
not having a Recruitment and Selection Plan on file and
approved by the State Personnel Commission shall follow the
process set forth in the Office of State Personnel's
Recruitment and Selection Plan.
Authority- G.S. 126-4(4).
SUBCHAPTER U - EMPLOYEE RELATIONS
SECTION .0500 - EMPLOYEE GRIEVANCES
.0503 MINIMUM PROCEDURAL REQUIREMENTS
The following provisions are the minimum requirements for
approval bv the State Personnel Commission.
(1) An employee with a grievance that does not allege
unlawful discrimination as defined by G.S. 126-16
or G.S. 126-36. that does not allege a violation of
G.S. 126-7.1(a) or (c). G.S. 126-82. or that does not
allege a denial of employment or promotion in
violation of G.S. 126-14.2 shall be required to first
discuss the problem with the immediate supervisor.
Where the grievance does not fall within the
administrative or decision-making authority of the
immediate supervisor, the immediate supervisor,
shall within 48 hours of receipt of the grievance,
refer the grievance to the lowest level supervisor
with administrative or decision-making authority
over the subject matter of the grievance and notify
the employee of the fact of and the basis for the
referral. The agency grievance procedure must
outline those issues in addition to contested case
issues under G.S. 126-34.1. if anv. that are grievable
under each agency's internal grievance procedure
and whether and to what extent persons who have
not attained career status under G.S. 126 1A 126-1.1
may utilize the agency grievance procedure.
(2) The employee shall have the right to have the
derision of the immediate supervisor reviewed. The
step or steps after the immediate supervisor's step
must include a step at which the employee has the
right to orally present the grievance and where the
reviewer is outside the employee's chain of
command.
(3) Any decision rendered after the step of the
supervisor's decision shall be issued in writing and
the final agency decision shall be issued within a
reasonable period of time as defined in this Section.
(4) At the step involving the reviewer (person or body)
outside the employee's chain of command, the
employee shall have the right to challenge whether
the reviewer can render an unbiased decision. The
agency grievance procedure shall establish a process
for challenging the reviewer's impartiality and the
process for the selection of a replacement when
necessary.
(5) For matters that are contested case issues under G.S.
126-34.1. if the employee is not satisfied by the final
decision of the agency head, the employee shall have
the right to appeal to the State Personnel
Commission within 30 days of receipt of the final
agency decision. If the employee is unable within a
reasonable period of time to obtain a final agency
decision, the employee's right of appeal is governed
by G.S. 150B-23(f)~
(6) The agency shall state the methods of notifying
current employees and newly appointed employees
of any change to the agency grievance procedure no
la'.er than 30 days prior to the effective date of the
change.
(7) The agency shall establish the time limit for the
agency and employee to respond at each step in the
grievance procedure. No time limit for an agency to
respond or to act shall be more than twice the time
limit for the employee.
(8) The grievance procedure shall include the effective
date of the procedure and of any changes to the
procedure.
(9) The grievance procedure shall comply with the
requirements of 25 NCAC U .0615.
Authority G.S. 126-4(9); 126-4(10): 126-35; 150B-23.
.0512 VIOLATIONS OF G.S. 126-14.2
(a) A state employee or applicant for initial State employee
may complain directly through the Civil Rights Division of the
Office of Administrative Hearings about a denial of
employment or promotion if al] the following conditions apply :
( 1 ) the person alleging the violation applied for the
position [n question during the open application
period:
the person alleging the violation was not hired into
the position in question;
the person allegin g the violation was among the pool
121
01
13:9 NORTH CAROLINA REGISTER November 2, 1998 777
PROPOSED RULES
of the most qualified applicants;
(4) the successful applicant for the position was not
among the pool of the most qualified applicants; and
(5) the hiring decision was ]n violation of G.S. 126-14,2
because of political affiliation or political influence.
(b) The complaining State employee or applicant must file
their complaint with the Civil Rights Division of the OAH
within 30 days after the complainant receives written notice
that the position in question has been filled.
(c) Upon an initial determination by the Civil Rights
Division of the OAH that there is probable cause to believe
that there has been a violation of G.S. 126-14.2, the
complaining State employee or applicant may file, pursuant to
G.S. 126-34.1 and Article 3 of OS, 1 50B, a petition for a
contested case hearing with the OAH Contested Case Division
within 15 days.
(d) The administrative law judge shall issue a recommended
decision to the State Personnel Commission. The State
Personnel Commission shall make a final written decision ]n
accordance w ith the law.
(ej l_f the initial determination by the Civil Rights Division
of the OAH is that there is no probable cause to believe that
there has been a violation of G.S. 126-14.2, that determination
shall be conclusive of any rights of further appeal to the State
Personnel Commission, but shall not be admissible or binding
in any separa'e or subsequent civil action or proceeding.
Authority- G.S. 126-4.
SECTION .0600 - DISCIPLINARY ACTION:
SUSPENSION AND DISMISSAL
.0603 APPEALS
(a) A career employee who has been demoted, suspended or
dismissed shall have 15 calendar days from the date of his
receipt of written notice of such action to file an appeal with
his department/university grievance procedure. Grievances
which do not allege discrimination a violation of G.S. 126-
7.1(a) or [c_L G.S. 126-82, or that do not allege a denial of
employment or promotion in violation of G.S. 126-14.2 must!
follow the department or university grievance procedure. An
appeal of a final departmental or university decision must be
filed in accordance with G.S. 150B-23 and within 30 calendar
days of receipt of the final agency decision.
(b) Grievances which allege discrimination may. at the
election of the employee, proceed through the department or
university procedure or proceed directly to the State Personnel
Commission (SPC) for a hearing by the Office of
Administrative Hearings (OAH) and a decision by the SPC. A
direct appeal to the SPC (such appeal involving a contested
case hearing by the OAH and a recommended decision by that
agency to the SPC) alleging discrimination must be filed in
accordance with G.S. I50B-23 and must be filed within 30
calendar days of receipt of notice of the alleged discriminatory
act.
(c) Grievances which allege a violation of G.S. 126-14.2
must be filed with the Civil Rights Division of the OAH within
30 calendar days after the employee or applicant receives
written notice that the position in question has been filled. The
employee or applicant must file a petition for a contested case
hearing pursuant to G.S. 126-34.1 and Article 3 of G.S. 150B
within 15 davs of the initial determination by the OAH Civil
Rights Division that there has been a violation of G.S. 126-
14.2.
fe)(d) Grievances filed on an untimely basis (see G.S. 126- *
14.4, G.S. 126-35. G.S. 126-36 and G.S. 126-38) must be
dismissed. Allegations of discrimination raised more than 30
calendar days after receipt of notice of the occurrence of the
alleged discriminatory act must be dismissed.
Authority G.S. 126-1A: 126-35: 126-36: 126-38: 150B, Article
3: 150B-23.
778 NORTH CAROLINA REGISTER November 2, 1998 13:9
APPROVED RULES
This Section includes the Register Notice citation to Rules approved by the Rules Review Commission <RRC) at its meeting
of July 23, 1998 pursuant to G.S. 150B-21. 17(a)(1) and reported to the Joint Legislative Administrative Procedure
Oversight Committee pursuant to G.S. 150B-21.16. The full text of rules are published below when the rules have been
approved by RRC in a form different from that originally noticed

NORTH CAROLINA
REGISTER
VOLUME 13 • ISSUE 9 • Pages 753 - 802
November 2, 1998
IN THIS ISSUE
Executive Order
Labor - Verbatim Adoptions of Federal Standards
Voting Rights Letters
Administrative Hearings, Office of
Cosmetic Art Examiners
Environment and Natural Resources
Health and Human Services
Revenue
Secretary of State
State Personnel, Office oi
Rules Review Commission
Contested Case Decisions
PUBLISHED BY
The Office ofAdministrative Hearings
Rules Division
PO Drawer 27447
Raleigh, NC2 7611- 744 7
Telephone (919) 733-2678
Fax (919) 733-3462
RECEIVED
NOV 2 1998
KATHRINE R. EVERETT
LAW LIBRARY
This publication is printed on permanent, acid-free paper in compliance with G.S. 125- 11.13
For those persons that have questions or concerns regarding the Administrative Procedure Act or any of jj
components, consult with the agencies below. The bolded headings are typical issues which the givi
agency can address, but are not inclusive.
I
Rule Notices, Filings, Register, Deadlines, Copies of Proposed Rules, etc.
Office of Administrative Hearings
Rules Division
Capehart-Crocker House (919) 733-2678
424 North Blount Street (9 1 9) 733-3462 FAX
Raleigh, North Carolina 27601-2817
contact: Molly Masich, Director APA Services
Ruby Creech. Publications Coordinator
mmasich@oah.state.nc.us
rcreech@oah.state.nc.us
Fiscal Notes & Economic Analysis
Office of State Budget and Management
116 West Jones Street
Raleigh. North Carolina 27603-8005
contact: Mark Sisak, Economist III
(919)733-7061
(919) 733-0640 FAX
msisak@osbm.state.nc.us
Rule Review and Legal Issues
Rules Review Commission
1307 Glenwood Ave., Suite 159
Raleigh. North Carolina 27605
contact: Joe DeLuca Jr., Staff Director Counsel
Bobby Bryan, Staff Attorney
(919)733-2721
(919) 733-9415 FAX
Legislative Process Concerning Rule-making
Joint Legislative Administrative Procedure Oversight Committee
545 Legislative Office Building
300 North Salisbury Street (919) 733-2578
Raleigh, North Carolina 2761
1
(919) 715-5460 FAX
contact: Mary Shuping, Staff Liaison marys@ms.ncga.state.nc.us
County and Municipality Government Questions or Notification
NC Association of County Commissioners
2 1 5 North Dawson Street' (9 1 9) 7 1 5-2893
Raleigh, North Carolina 27603
contact: Jim Blackburn or Rebecca Troutman
NC League of Municipalities
215 North Dawson Street
Raleigh, North Carolina 27603
contact: Paula Thomas
(919)715-4000
This publication is printed on permanent, acid-free paper in compliance with G.S. 125-1 1.13
NORTH CAROLINA
REGISTER
ii.
in.
IN THIS ISSUE
EXECUTIVE ORDERS
Executive Order No. 140 753 - 754
IN ADDITION
Labor
Verbatim Adoptions of Federal Standards
Voting Rights Letters
755
756 - 758
RULE-MAKING PROCEEDINGS
Secretary of State
N.C. Electronic Commerce Act 759
Volume 13, Issue 9
Pages 753 - 802
November 2, 1998
This issue contains documents officially filed
through October 12. 1998.
Office of Administrative Hearings
Rules Division
424 North Blount Street (27601
)
PO Drawer 27447
Raleigh. NC 276 11 -7447
(919)733-2678
FAX (919) 733-3462
Julian Mann III. Director
Camille Winston. Deputy Director
Molly Masich. Director of APA Services
Ruby Creech. Publications Coordinator
Jean Shirley, Editorial Assistant
Linda Dupree. Editorial Assistant
Jessica Flowers. Editorial Assistant
IV. PROPOSED RULES
Environment and Natural Resources
Sedimentation Control Commission 760
Revenue
Corporate Income & Franchise Tax 760 - 762
Individual Income Tax 762 - 767
Sales and Use Tax 767 - 773
State Personnel, Office of
State Personnel Commission 773 - 778
V. APPROVED RULES 779-786
Administrative Hearings, Office of
Civil Rights Division
Environment and Natural Resources
Environmental Health Services
Wildlife Resources
Health and Human Services
Governor Morehead School
Medical Assistance
Mental Health: General
Social Services
Licensing Boards
Cosmetic Art Examiners
VI. RULES REVIEW COMMISSION 788-790
VII. CONTESTED CASE DECISIONS
Index to ALJ Decisions 791-796
Text of Selected Decisions
98 EHR 0322 797-803
VIII. CUMULATIVE INDEX 1-74
Xorth Carolina Register is published semi-monthh for $195 per \ ear b\ the Office of Administrative Hearings. 424 North Blount Street. Raleigh. NC
27601. (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh. NC. POSTMASTER : Send Address changes to the North Carolina Register.
PO Drawer 27447. Raleigh. NC 2761 1-7447
NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM
The North Carolina Administrative Code (NCAC) has four major subdivisions ofrules. Two ofthese, titles and chapters,
are mandatory. The major subdivision ofthe NCAC is the title. Each major department in the North Carolina executive
branch of government has been assigned a title number. Titles are further broken down into chapters which shall be
numerical in order. The other two, subchapters and sections are optional subdivisions to be used by agencies when
appropriate.
TITLE/MAJOR DIVISIONS OF THE NORTH CAROLINA ADMINISTRATIVE CODE
TITLE DEPARTMENT LICENSING BOARDS CHAPTER
1 Administration Acupuncture 1
2 Agriculture Architecture 2
3 Auditor Athletic Trainer Examiners 3
4 Commerce Auctioneers 4
5 Correction Barber Examiners 6
6 Council of State Certified Public Accountant Examiners 8
7 Cultural Resources Chiropractic Examiners 10
8 Elections Employee Assistance Professionals 11
9 Governor General Contractors 12
10 Health and Human Sen ices Cosmetic Art Examiners 14
11 Insurance Dental Examiners 16
12 Justice Dietetics "Nutrition 17
13 Labor Electrical Contractors 18
14A Crime Control & Public Safety Electrolysis 19
15A Environment and Natural Foresters 20
Resources Geologists 21
16 Public Education Hearing Aid Dealers and Fitters 22
17 Revenue Landscape Architects 26
IX Secretary of State Landscape Contractors 28
19A Transportation Marital and Family Therapy 31
2(1 Treasurer Medical Examiners 32
*21 Occupational Licensing Boards Midwifery Joint Committee 33
">"> Administrative Procedures Mortuary Science 34
23 Community Colleges Nursing 36
24 Independent Agencies Nursing Home Administrators 37
25 State Personnel Occupational Therapists 38
26 Administratis e Hearings Opticians 40
27 NC State Bar Optometry 42
Osteopathic Examination & Reg. (Repealed) 44
Pastoral Counselors. Fee-Based Practicing 45
Pharmacy 46
Physical Therapy Examiners 48
Plumbing. Heating & Fire Sprinkler Contractors 50
Podiatry Examiners 52
Professional Counselors 53
Psychology Board 54
Professional Engineers & Land Surveyors 56
Real Estate Appraisal Board 57
Real Estate Commission 58
Refrigeration Examiners 60
Sanitarian Examiners 62
Social Work Certification 63
Soil Scientists 69
Speech & Language Pathologists & Audiologists 64
Substance Abuse Professionals 68
Therapeutic Recreation Certification 65
Veterinan Medical Board 66
Note: Title 21 contains the chapters of the various occupational licensing boards.
2 '
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e .a Q jg IT. sO r- oc £ = r*j *T w. I- OC
V 3 rj ri « •*) r^ »*i ft ft f^ >*> fO r*l 1*3 ear in which the return was filed. Substitute wage and
tax statements and copies of wage and tax statements
generated by a preparer" s or transmitter's software are not
acceptable. The employer-issued state copy of the wage and
tax statement is the only acceptable wage and tax statement.
(k) After the ERO receives IRS acknowledgment with a
"NC" indicator. Forms NC 8453 shall be batched and mailed
to the Department of Revenue in the same manner as the
federal forms 8453s are furnished to the Internal Revenue
Service. Forms not received by the Department in a timely
manner will be requested in writing by the North Carolina
Department of Revenue Electronic Filing Coordinator. Any
request for missing Forms NC 8453s must be responded to in a
timeh manner. Failure to comply w ith the obligations of an
Electronic Filer can cause the applicant's participation in the
electronic filing program to be terminated.
(1) The status levels of a participant in the electronic filing
program are as follows:
(1) Accepted in good standing - electronic filing
participant who has filed a North Carolina
application for electronic filing and has met all the
criteria for the electronic filing program and has not
received a written warning from the Department.
(2) Warning status - electronic filing participant who
has been issued a letter of warning due to
noncompliance with program requirements.
(3) Probation - electronic filing participant who has
been issued a warning letter from the Department.
(4) Termination - electronic filing participant who has
failed to comply with the terms of probation or has
committed flagrant violations of the program
requirements.
(m) Taxpayer returns transmitted by an applicant or former
participant who has been rejected from the program shall not
be processed by the Department. The taxpayers shall be
notified to file paper returns.
(n) Terminated participants may apply for reinstatement in
the Federal/State Electronic Filing Program upon compliance
with all requirements of the program.
Authority G.S. 105-262.
SECTION .0600 - TAX CREDITS
.0606 CREDIT FOR CHILD AND DEPENDENT
CARE EXPENSES
(a) A tax credit is allowable for the employment-related
expenses for child and dependent care. The credit is
calculated on the net qualified federal employment-related
expenses after reduction for any employer-paid dependent care
assistance that is excluded fron federal gross income. In
calculating the credit, expenses incurred in the previous tax
year but not paid until the current tax year shall be included.
(b) For purposes of determining the credit allowed under
G.S. 1 05- 1 5 1 . 1 1 , an individual individuals who h are not able
to dress, clean, or feed himself themselves because of a
physical or mental condition « are not able to care for himself.
themselves. Individuals with mental conditions who require
constant attention to prevent them from injuring themselves or
others are considered to be unable to care for themselves.
(c) For a dependent who becomes age seven during the
taxable year and who is not physically or mentally incapable of
caring for himse lf, himself or herself, the tax credit for
employment-related expenses incurred prior to the dependent's
seventh birthday shall be calculated using the percentages in
the column labeled Percentage B under G.S. 105-151. ll(al).
The tax credit for employment-related expenses incurred after
the dependent becomes age seven shall be calculated using the
percentages in the column labeled Percentage A under G.S.
105-151. Il(al).
(d) If an individual was a res i dent of North Carolina and his
spouse was a nonresident, h e may not claim cred i t for any
employment re l at ed—
e
xpenses—paid—by—h+s
—
spouse . An
individual w ho was a nonresident during any part of the tax
year, must reduce the employment rel at ed expenses by the
amount h e pa i d during th e pe riod he was a nonres i dent. A
1 3:9 NORTH CAROLINA REGISTER November 2, 1998 765
PROPOSED RULES
nonresident or part-vear resident |s allowed this tax credit jn
proportion to the amount of federal taxable income, as
adjusted, that is taxable by North Carolina.
Authority G.S. 105-151.11; 105-262.
SECTION .3200 - PENALTIES: INDIVIDUAL
INCOME TAX
.3203 PENALTIES FOR FAILURE TO FILE AND
PAY
(a) General. ~ Under the provisions of G.S. 105 236 105-
236. both the failure to tile and failure to pay penalties, if due.
can be applied for the same month. If a return is filed late
without payment of the tax shown due. both the lat e filing and
lat e payment failure to file and failure to pav penalties will be
assessed at the same time.
(b) Extension. ~ If the return is filed under an extension,
the failure to file and fai l ure to pay penalti es will be assessed
penalty applies from the extended filing date rather than from
the original due date. The failure to pay penalty is 1 perc ent
of the tax not paid by the e xt ended applies from the original
due date of the return. The failure to pay penalty will app l y on
any rema i ning balance due if is assessed when the tax paid by
the original due date of the return is less than 90 percent of the
total amount of tax due. If the 90 percent rule is met. any
remaining balance due. including interest, must be paid with
the income tax return on or before the expiration of the
extension period to avoid the lat e payme nt failure to pay
penalty. Interest is due from the original due date to the date
paid.
(c) Amended Return. ~ The failure to pay penalty does not
apply to amounts paid w ith an amended return if the amount
shown due on the return is paid when the return is filed.
(d) Assessment. — The failure to gay penalty applies to a
proposed assessment of additional tax due that js not paid
within 30 davs of the assessment.
Authority G.S. 105-152
purposes are as follows:
(I)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
:io)
Place of birth.
Permanent residence of father parents.
Family connections, close friends.
Address given for military purposes.
Civic ties, church membership, club or lodge
membership.
Bank account or business connections.
Payment of state income taxes.
Listing of "legal" or "permanent" address on Federal
tax returns.
C. "tinuous car registration and driver's license.
Voting bv absentee ballot (one of th e best te sts to
determine perman ent residence ), ballot.
(11) Occasional visits or spending one's leave "at home
if a member of the armed services.
(12) Ownership of a home.
(13) Professional ties-teachers, bar. CPA. etc.
certificates.
(14) Attendance of children at State supported colleges
or universities on a basis of residence—taking
advantage of low er tuition fees.
(15) Execution of approved certificates or other
statements indicating permanent residence.
(16) Expression of intention.
(c) A legal resident of North Carolina serving in the United
States Armed Forces is liable for North Carolina income tax
and North Carolina income tax shall be withheld from his that
individual's military pay whether he the individual is stationed
in this State or in some other state or country.
(d) An individual who enters military service while a
resident of North Carolina is presumed to be a resident of this
State for income tax purposes. Residency in this State is not
abandoned until residency is established elsewhere.
(e) To change residency, th e servic eman an individual in
military service must not only be present in the new location
with the intention of making it his a new domicile, but must
also factually establish that he the individual has done so.
Authority G.S. 105-1 34.lt 12); 105-134.5; 105-262.
.3904 TAXABLE INCOME OF NONRESIDENTS
AND PART-YEAR RESIDENTS
i
766 NORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
(a) Nonresidents and part-year residents are required to
prorate their federal taxable income to determine the portion
that is subject to North Carolina tax.
(b) An individual who files a joint federal income tax return
with his or her spouse but cannot qualify to file a joint North
Carolina income tax return because the spouse is a nonresident
and had no North Carolina taxable income must calculate the
individual's federal taxable income on a federal income tax
form as a married person filing a separate federal income tax
return and attach it to the individual's North Carolina return to
show how the separate federal taxable income was determined.
The individual filing the separate federal return must report
only the individual's income, exemptions, and deductions. In
lieu of making the calculation on a federal form, an individual
may submit a schedule showing the computation of the
individual's separate federal taxable income. An individual
who submits a schedule must attach a copy of pages 1 and 2 of
the individual's joint federal return if the federal return reflects
an address outside North Carolina.
(c) An individual who has income from sources within
another state or country while a resident of North Carolina and
is subject to tax on the income by the other state or country
may be eligible to claim a tax credit under G.S. 105-151.
(d) A nonresident is not entitled to the tax credit s credit for
tax paid another state or country or for child and dependent
care expenses, country.
deductions are expected to exceed the standard deduction and
for each two thousand five hundred dollars (S2.000) ($2.500)
of adjustments reducing income. For taxpayers whose annual
income equals or exceeds the applicable threshold for their
filing status, an additional allowance may be claimed for each
two thousand dollars (S2.000) that their itemized deductions
are expected to exceed the standard deduction and for each
two thousand dollars ($2.000) of adjustments reducing
income. The thresholds are:
Filing Status Applicable Threshold
Head of Household $80.000
Married $50.000
Single $60.000
(b) Tax Credits. — If an employee An employee who will be
entitled to a tax credit, he credit may claim one additional
allowance for each one hundred forty dollars ($110.00)
seventv-five dollars ($175.00) of tax credit, credit, unless the
employee's annual income equals or exceeds the applicable
threshold set out in paragraph (b) of this Rule for the
employee's filing status. In that circumstance, the employee
may claim an additional allowance of only one hundred forty
dollars ($140.00) for each tax credit.
Authority G.S. 105-163.3; 105-163.5: 105-262.
x -x w yt w w XWJCWWWWWWWWWW
Authority G.S. 105-134.5: 105-151: 105-262.
SECTION .4000 - S CORPORATION
.4004 TAX CREDITS
If part of the S corporation's income is earned yvithin and
taxed by another state, either to the individual or to the
corporation, a resident shareholder is entitled to a tax credit on
h+s the individual or the estates and trusts income tax return for
h+s the share of the tax paid to the other state. A shareholder
claiming the tax credit must attach a schedule to his the income
tax return reflecting the total amount of tax paid to the state
State by the S corporation, and explaining how his the
shareholder's pro rata share of the tax was determined.
Nonresident shareholders are not allowed credit for tax paid to
another state.
Authority G.S. 105-131.8; 105-262.
SUBCHAPTER 6C - WITHHOLDING
Notice is hereby given that the Department of Revenue
intends to amend rules cited as 17 NCAC 7B .0104.
.0206. .1301 .:303. .1602. .1905. .2101.
Editor's Note: G.S. 150B-1 (d)(4) exempts the Department of
Revenuefrom Part 2 Article 2A ofChapter 150 with respect tf'
the notice and hearing requirements. The Department will
however publish the text of proposed rules in the North
Carolina Register prior to the scheduled time ofreview by the
Rules Review Commission.
Proposed Effective Date: July 1. 1999
Instructions on How to Demand a Public Hearing (must be
requested in writing within 15 days of notice): A person may
request a public hearing by sending a written request for a
hearing to Mr. Tim Holmes. Sales and Use Tax Division, at
PO Box 871, Raleigh. NC 27602. by November 19. 1998.
Notice of any public hearing scheduled on these proposed
Rules will be published in the Register.
SECTION .0100 - WITHHOLDING INCOME TAXES
.0124 ADDITIONAL WITHHOLDING
ALLOWANCES
(a) Deductions. ~ Additional withholding allowances may
be claimed by taxpayers expecting to have allowable itemized
deductions exceeding the standard deduction or alloyvable
adjustments to income. One For most taxy pavers, one
additional allowance may be claimed for each two thousand
five hundred dollars ($2,000) ($2.500) that the itemized
Reason for Proposed Action: 17 NCAC 7B .0104, .0206 -
Chapter 121 ( HB 136~) of the 1998 Session repealed the
annual wholesale license, effective July 1. 1998. and renamed
the required "license" as a "certificate of registration" to
match the terminology used by the Department. The
amendments to these rules reflect these changes.
1 7 \CAC 7B . 1301, . 1303 - These rules are amended to delete
a confusing reference to donees in .1301 and to clarify the
taxation of property delivered to out-of-state donees. Rule
13:9 NORTH CAROLINA REGISTER November 2, 1998 767
PROPOSED RULES
.1301 addesses purchasers and Rule .1303 addresses donees.
A donee is the recipient ofa gift.
17 NCAC 7B. 1602, .1905, .2101 - These rules are amended
to reflect changes made by SB 132" ofthe 199H Session. That
bill repeals the sales tax on piped natural gas effective July I.
1999.
Comment Procedures: Written comments may be submitted
to Mr. Tim Holmes at the North Carolina Department of
Revenue. Sales and Use Tax Division. PO Box 871, Raleigh.
NC 2 '602. Comments received will be taken into
consideration. If you have questions, you may call Mr
Holmes at (919) '33-2151.
CHAPTER 7 - SALES AND USE TAX
SUBCHAPTER 7B - STATE SALES AND USE TAX
SECTION .0100 - GENERAL PROVISIONS
.0104 RETURNS
(a) General. -- G.S. 105-164.16 establishes the filing
frequency of sales and use tax returns and the content of the
returns. G.S. 105-164.4(c) requires a retailer and a wholesale
merchant to register with the Department and obtain a l ic ense .
G.S. 105 164 .5(1) require s a whol esal e merchant to regi s t er
with th e
—
Departm ent and obtain a lic ense, certificate of
registration. G.S. 105-164.6 requires a retailer who delivers
property for storage, use. or consumption but does not have a
place of business in this State to register with the Department
and obtain a lic en se , certificate of registration. A person who
is engaged in business, is not otherwise required to file a sales
and use tax return, and. on two or more occasions within a
twelve-month period, purchases property subject to use tax
must register with the Department and begin filing sales and
use tax returns. A person who is engaged in business, is not
otherwise required to file a sales and use tax return, and
purchases property subject to use tax only once in a twelve-month
period must file a return and pay the tax due within 15
days after the end of the month in which the purchase was
made.
(b) Schedules. - A retailer who files an estimated return for
a semimonthlv reporting period that reports tax payable by
more than one location in the State must attach two schedules
to the return. One schedule must list the amount of State tax
due for each location in the State and the other must list the
amount of local tax due for each county.
(c) No Sales or Purchases Bv Business. — A retailer who
does not make any sales during a reporting period must file a
return for that period and mark '"no sales" on the return.
Similarly, a person who is not a retailer but is engaged in
business, purchases tangible personal property for the business
that is subject to use tax. and does not make am taxable
purchases during a reporting period must file a return for that
period and mark "no purchases" on the return.
(d) Seasonal Business. - A retailer who engages in business
for six or fewer consecutive months in each year may register
as a seasonal filer and indicate the months in which the retailer
engages in business. A retailer who is registered as a seasonal
filer is not required to file a return for an off-season reporting
period in which the retailer did not engage in business.
(e) Wholesale Merchant. — A person who engager
exclusively in the business of making wholesale sales is not^
required to file a return. A person who, on two or more
occasions within a twelve-month period, either makes taxable
sales to users, consumers, or nonregistered merchants or makes
purchases subject to use tax is not engaged exclusively in the
business of making wholesale sales and must begin filing sales
and use tax returns. A wholesale merchant who is not required
to file a sales and use tax return and who. on only one occasion
within a twelve-month period, either makes taxable sales to
users, consumers, or nonregistered merchants or makes
purchases subject to use tax must file a return and pay the tax
due within 15 days after the end of the month in which the sale
or purchase was made.
(f) Non-Business Use Tax. ~ An individual who is not
engaged in the business of selling tangible personal property at
retail and who purchases for a non-business purpose tangible
personal property that is subject to use tax must report the tax
due on Form E-554. The return is due annualK by the date set
under G.S. 105-164.16.
Authority G.S. 105-164.3; 105-164.16; 105-164.1'; 105-262.
SECTION .0200 - GENERAL APPLICATION OF
LAW TO MANUFACTURING AND
INDUSTRIAL PROCESSING .
.0206 SALES BY MANUFACTURERS
(a) Sales of tangible personal property by manufacturer s a
manufacturer to a registered retailer or a wholesale merchants
merchant in this stat e State for the purpose of resale are not
subject to sales or use tax provided jf the transactions are
supported by properly executed Certificates of Resale. Form
E-590.
(b) Sales of tangible personal property by manufacturers a
manufacturer to a nonresident retail or wholesale merchants
merchant for the purpose of resale in another state are not
subject to sales or use tax when even though the property is
delivered to such purchasers in this stat e provid ed State if the
nonresident retail or wholesale merchant is registered for sales
and use tax purposes in a taxing jurisdiction outside this state
State and the transactions are supported by properly executed
Certificates of Resale. Form E-590.
(c) Sales of tangible personal property by manufacture rs
who de liv er a manufacturer who delivers the property to
purchasers outside this state State or who de liv er delivers the
propertv to a common carrier or to the mails for delivery to the
purchase r purchasers at a point outside this state State are not
subject to sales or use tax. Such These sales must be
supported by the prescribed records.
(d) Sales of tangible personal property by manufacturers to
nonregistered merchants in this state State and sales to ,
nonregistered nonresident merchants who accept delivery of'
the property in this state State are subject to the sales or use
tax.
768 NORTH CAROLINA REGISTER November!, 1998 13:9
PROPOSED RULES
A trip sheet that is signed by the seller's delivery
agent and shows the signature and address of the
person who received the delivered goods outside the
state.
{e)—Manufacturers purchasing tangible personal property (3)
and reselling it in its same form to regi s tered merchants for
resale shall obtain an annual whol esale license. Manufacturers
maintaining a warehouse or other place of distribution in this
state, separate and apart from the place of manufacture , for th e
sale—ef
—
distribution—of their—manufactured—products—te Authority G.S. 105-164.13; 105-262.
registered merchants for the purpose of resal e shall obtain an
annual wholesal e license. Manufacturers who are required to
obtain the whol esale license are also liabl e for a merchants
certificate of registration license .
fft(e) Manufacturers who only make sales to registered
merchants for resale or sales which that are otherwise exempt
from the tax are not required to report such the sales to the
Department; however, manufacturers making taxable retail
sales or purchases subject to the use tax must register with the
Department and file sales and use tax reports reflecting such
the taxable sales or purchases and pay the applicable tax due
thereon.
(g-Hf) A manufacturer becomes liable for tax on its sales of
tangible personal property when it sells directly to users and
consumers, including employees. Such These sales include :
include aj| of the following:
(1) sales of bottled drinks by a bottling plant to users
and consumers, including employees: employees.
(2) sales to employees or other persons of food
products, meals meals, and other prepared foods by
an industrial plant or other business of any kind
through a commissary, concession stand, cafeteria,
lunch stand stand, or other similar places : place.
(3) sales of fuel, hosiery, furniture furniture, or any
other kind of taxable tangible persona! property to
employees or any other users or consumers.
fh-Kg) A manufacturer's casual or occasional sale of its
worn out. obsol ete obsolete, or surplus machinery, accessori e s
accessories, and similar items are not subject to the tax.
Authority G.S. 105-164.4;
105-164.28; 105-262.
105-164.6; 105-164.13;
SECTION .1300 - SALES IN INTERSTATE
COMMERCE
.1301 OUT-OF-STATE DELIVERIES
Sales within the state State of tangible personal property
that the vendor delivers to the purchaser at a point outside the
state. State, or that the vendor delivers to a common carrier or
to the mails for transportation and deliver}, to the purchaser ef
a donee at a point outside the state . State, are not subject to the
applicable state and local sales or use tax if the property is not
returned to a point within the stat e State and the vendor
furnishes acceptable proof of transportation to a point outside
the state . State. The most acceptable proof of transportation
and deliver) to a point outside the state State is any of the
following:
(1) A waybill or bill of lading made out to the seller's
order calling for deliver).
(2) An insurance or registry receipt issued by the United
States Postal Service, or a postal service or receipt.
.1303 DELIVERIES TO DONEES
Sales of printed material by vendors other than printer s and
sales of other taxable tangible personal property to any person
in North Carolina which such person provides without charge
to recipi ents, whether it be advertising materials or gift s or
donation s are subj ect to the four percent state tax and any
applicable local sal es or use tax even though the vendor
de liv ers the property to th e donee at a point outside this state
and without regard to whether such de livery is made by mail,
common carri er or otherwise.—Sales of taxable tangible
personal property delivered to a donee or any other user or
consumer in North Carolina are taxable.
A donee is a person to whom the buyer of tangible personal
property gives the property without charge. When a North
Carolina retailer sells tangible personal property to a resident
buyer and the retailer, at the direction of the buyer, delivers the
property to the buver's donee instead of to the buyer, the sale
by the retailer is subject to applicable State and local sales tax.
The tax applies regardless of whether the donee js located
inside or outside the State and regardless of whether the
delivery is made by mail, by common carrier, or by another
means .
When a North Carolina retailer sells tangible personal
property to a nonresident buver and the retailer, at the direction
of the buyer, delivers the property to the buver's donee instead
of to the buver. the sale by the retailer js subject to applicable
State and local sales tax only if the delivery to the donee js
made inside the State. If the delivery to the donee is made
outside the State, no State or local sales or use tax applies. A
retailer who, at the direction of a nonresident buver. delivers
property to the buver's donee at a point outside the State must
have acceptable proof of delivery m accordance with 17
NCAC7B .1301.
Authority G.S. 105-164.4; 105-164.6; 105-262.
SECTION .1600 - SALES TO OR BY HOSPITALS:
EDUCATIONAL: CHARITABLE OR
RELIGIOUS INSTITUTIONS: ETC.:
AND REFUNDS THERETO
.1602 REFUNDS TO NONPROFIT ENTITIES AND
MEDICINES AND DRUGS PURCHASED BY
HOSPITALS
(a) The refund provisions contained in this Rule do not
apply to the tax on taxable sales by the nonprofit entities
named in G.S. 105- 164. 14(b) and no part thereof shall be
refunded or claimed as a refund. Nonprofit entities registered
for sales and use tax purposes may purchase the tangible
personal property which they resell without paying tax thereon
to their suppliers provided they have furnished such suppliers
13:9 NORTH CAROLINA REGISTER November 2, 1998 769
PROPOSED RULES
with properly executed Certificates of Resale. Form E-590.
Certificates of resale may not be used by any nonprofit entity
in making purchases of tangible personal property to be used
or consumed by such purchaser.
(b) All refund claims shall be substantiated by proper
documentary proof and only the taxes actually paid by the
claimant during the period for which the claim for refund is
filed may be included in the claim. Any local sales or use
taxes included in the claim shall be separately stated in the
claim for refund. In cases where more than one county's tax
has been paid, a breakdown shall be attached to the claim
showing the amount of each county's local tax separately.
(c) As to taxes paid on the claimant's purchases for use.
other than those made by contractors performing work for the
claimant, invoices or copies of invoices showing the property
purchased, the cost thereof, the date of purchase and the
amount of state and local sales or use tax paid during the
refund period shall constitute proper documentary proof.
(d) To substantiate a refund claim for sales or use taxes paid
on purchases of building materials, supplies, fixtures and
equipment by its contractor, the claimant shall secure from
such contractor certified statements setting forth the cost of the
property purchased from each vendor and the amount of state
and local sales or use taxes paid thereon. In the event the
contractor makes several purchases from the same vendor,
such certified statement shall indicate the invoice numbers, the
inclusive dates of the invoices, the total amount of the inv 'ces
and the sales and use taxes paid thereon. Such statement shall
also include the cost of any tangible personal property
withdrawn from the contractor's warehouse stock and the
amount of state and local sales or use tax paid thereon by the
contractor. Similar certified statements by his subcontractors
shall be obtained by the general contractor and furnished to the
claimant. Any local sales or use taxes included in the
contractor's statements shall be shown separately from the state
sales or use taxes. The contractor's statements shall not
contain sales or use taxes paid on purchases of tangible
personal property by such contractors for use in performing the
contract which does not annex to. affix to or in some manner
become a part of the building or structure being erected,
altered or repaired which is owned or leased by a nonprofit
entity for use by a nonprofit entity named in G.S. 105-
164.14(b) for carrying on its nonprofit activities. Examples of
property on which sales or use tax has been paid by the
contractor and which shall not be included in the contractor's
statement are scaffolding, forms for concrete, fuel for the
operation of machinery and equipment, tools, equipment repair
parts, equipment rentals and blueprints.
(e) The refund provisions set forth in this Rule apply only
to the nonprofit entities described in G.S. 1 05- 164. 14(b). but
do not apply to nonprofit fraternal, civic or patriotic
organizations, notwithstanding that such organizations may
perform certain charitable functions. The refund provisions
set forth in this Rule do not apply to nonprofit entities which
are owned and controlled by the United States, the state or a
unit of local government except hospitals and medical
accommodations created under the Hospital Authorities Law.
Article 2 of Chapter 13 IE of the General Statutes and
nonprofit hospitals owned and controlled by a unit of local
government that elect to receive semiannual refunds under
G.S. 105-164. 14(b) instead of annual refunds under G.S.
105- 164. 14(c). Any nonprofit hospital owned and controller
by a unit of local government may submit a written request to
receive semiannual refunds under G.S. 105-164. 14(b) instead
of annual refunds under G.S. 105-164. 14(c). The request shall
be effective beginning with the six-months refund period
following the date of the request and applies to sales or use
taxes paid on or after the first day of the refund period for
which the request is effective.
(f) The refund provisions of this Rule do not apply to sales
taxes incurred by employees on purchases of food, lodging, or
other taxable travel expenses paid by employees and
reimbursed by a nonprofit entity listed in G.S. 105-164. 14(b).
These expenses are personal to the employee because the
contract for food, shelter, and travel is between the employee
and the provider and payment of the tax is by the employee
individually and personally. In this circumstance, a nonprofit
entity has not incurred any sales tax liability and has not paid
any sales tax: instead: it has chosen to reimburse a personal
expense of the employee. The refund provisions of this Rule
do not apply to any of the following:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Charges by a utility for e l ectricity, piped natural gas.
electricity and local. toll. or private
telecommunications services.
Occupancy taxes levied and administered by certain
counties and cities in this state.
Prepared food and beverage taxes levied by various^
local governments in this state. B,
Highway use taxes paid on the purchase, lease, or
rental of motor vehicles.
The white goods disposal tax levied on new white
goods.
The scrap tire disposal tax levied on new tires.
The dry-cleaning solvent tax levied on dry-cleaning
solvent purchased by a dry cleaning facility.
Authority G.S. 105-164.14; 105-262; 105-264.
SECTION .1900 - TIRE RECAPPERS AND
RETREADERS: TIRE AND TUBE REPAIRS
.1905 SALES TO TIRE RECAPPERS
(a) Sales to tire recappers of camelback or other rubber
products, cement and rubber solvent, cord fabric, wheel
weights and other items of a similar nature which enter into or
become an ingredient or component part of the recapped tires
or are attached to and delivered with the tires to the customer
are exempt from tax.
(b) The gross receipts derived by a utility from sales of
electricity and piped natural gas to tire recappers for use in
connection with the operation of the recapping plant are
subject to th e three pe rc ent stat e rat e of ta.X T to tax at the rate
set in G.S. 105-164.4. Sales of other -feel fuel, except piped M
natural gas, to tire recappers for use in connection with the ^
operation of the recapping plant are subject to the one percent
rate of tax. Sales of piped natural gas are exempt from sales
770 XORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
tax and are subject to the excise tax imposed by Article 5_E of
G.S. 105.
(c) Sales to tire recappers of mill machinery, or parts and
accessories therefor, for use exclusively in the recapping
process are subject to the one percent rate of tax, with a
maximum tax of eighty dollars ($80.00) per article. Sales to
contractors and subcontractors of mill machinery or mill
machinery parts and accessories for use by them in the
performance of contracts with manufacturing industries and
plants and sales to subcontractors purchasing mill machinery
or mill machinery parts and accessories for use by them in the
performance of contracts encompassed in such contracts with
manufacturing industries and plants are subject to a one
percent rate of tax, with a maximum tax of eighty dollars
($80.00) per article where applicable. Such mill machinery or
mill machinery parts and accessories must be for use by tire
recappers in the production process, as the term "production"
is defined in 17 NCAC 7B .0202(a)(1). to qualify for the one
percent rate of tax with a maximum tax of eighty dollars
($80.00) per article when purchased by such contractors or
subcontractors. Contractors and subcontractors may obtain
Contractor's and Subcontractor's Certificate. Form E-580, from
the Office Services Division, Taxpayer Assistance Section,
North Carolina Department of Revenue, to be executed by
them and furnished to their vendors in connection with such
purchases as the vendor's authority to apply the one percent
rate of tax thereto. The following items when sold to tire
recappers for use exclusively in the recapping process are
considered to be mill machinery or mill machinery parts and
accessories within the meaning of the Sales and Use Tax
Article:
wire brushes;
mold lube;
curing tubes and rims;
molds and matrices;
buffing equipment;
buffing discs;
buffing rasps;
rasp teeth;
crayons for marking tires;
tire trimmers;
boilers:
tire handling equipment used exclusively between
the beginning and ending steps of the recapping
process:
inspection spreaders used exclusively to inspect
casings being recapped;
spinners used for applying cement used on casings
being recapped;
pre-condensing tanks for air lines used for applying
cement, dusting buffed casings, and inflating curing
tubes;
casing balancers used exclusively in balancing
casings to be recapped;
tread builders used to apply tread rubber to casings
being recapped;
air compressors used exclusively in retreading or
recapping process:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19) dust collectors;
(20) knives, stitchers, rollers, shears, awls, and splicing
tools used to perform work on the ingredient
material or the manufactured product;
(21) thermometers, pyrometers, and durometers used in
testing mold heat and cure hardness of the rubber
used in the recapping process;
(22) bagging and debagging equipment;
(23) sprayers used exclusively in the recapping process;
(24) matrix loaders;
(25) steam traps and valves used in steam lines for curing
molds;
(26) mold cleaners.
(d) The following are examples of items which are subject
to the four percent state tax and any applicable local sales or
use tax when sold to tire recappers for use or consumption:
( 1
)
motor vehicle jacks:
(2) tire tools not used between the beginning and ending
recapping processes;
(3) balancing machinery used after recapping process is
completed;
(4) equipment used to remove tires from the rim before
the recapping process begins;
(5) administrative equipment such as office supplies,
file cabinets and other office equipment;
(6) cleaning compounds for janitorial and sanitary
purposes;
(7) uniforms for employees;
(8) advertising materials;
(9) lubricants, repair parts and accessories for motor
vehicles;
(10) inspection bags;
(11) gloves.
(e) The lists in Paragraphs (c) and (d) of this Rule are not
intended to be exclusive but are for illustrative purposes only.
If there is any question as to the tax status of any item not on
the lists, it may be submitted to the Secretary of Revenue for a
determination as to the applicable rate of tax.
Authority G.S. 105-164.4; 105-164.6; 105-262; 105-264.
SECTION .2100- ELECTRICITY: PIPED NATURAL
GAS: BOTTLED GAS: COAL: COKE: FUEL OIL:
OXYGEN: ACETYLENE: HYDROGEN: LIQUEFIED
PETROLEUM GAS AND OTHER COMBUSTIBLES
.2101 ELECTRICITY AND OTHER FUEL
fa)
—
Sal es of bottl ed gas. coal. coke, fu e l oil. oxygen,
acetyl ene .—hydrogen,—
l
iquefied—petrol eum—gas;—er-
—
othe r
combustibl es to users or con sumers are subj ect to the four
percent stat e tax and any applicable local rate of sal es or use
tax except those sales exempt from tax under G.S. 105 161.13
and those sal es subj ect to a low er rate of tax unde r G.S.
105 164 . 4 . The gross receipts de rived by a uti l ity from s al es
of el ectricity and piped natura l gas to users are subj ect to Stat e
tax^ -the- -pep ion to whom th e
—
The tax rate depend s
e l e ctricity or piped natural gas i s sold and the purpose for
wh i ch it will be used.—Gros s rec e ipts de riv ed from s al es of
J3:9 NORTH CAROLINA REGISTER November 2, 1998 771
PROPOSED RULES
el ectricity or piped natural gas to farmers, manufacturers,
laundri e s, and dry cl ean e rs for on e of th e purpose s describ ed
in G.S. 105 16 1 . 1 (a)(lf) are s ubj ect to Stat e sal es tax at th e
rat e of 2. 8 3 perc ent.—All other gro s s re ce ipts from sal e s of
electricity are subject to State sa l es tax at th e rate of 3 pe rc ent.
The gross receipt s deri ved by a utility from sal e s of e l e ctricity
and piped natural gas are not subj ect to the local s al es or use
derived from the s al e of el ectricity b\ a
is a fed eral agency and who i s required by contract with that
federal agency to make payment s in lieu of tax es are not
subj e ct to tax.—Sales to a small power production facility of
fu e l for u se by th e facility to gen e rat e e l octricity are ex empt
from sal es or use tax.
(h)
—
The gross rec e ipts de ri\ ed b> a utility from sal es of
piped natural gas are subj e ct to tax at th e applicable rate . The
tax is to be added as a separat e it em to th e charge s for piped
natural gas.—Gross re c e ipts upon which th e tax is due is th e
total amount for which the piped natural gas i s sold, including
any charges for s en ic e s that go into th e production or de liv e ry
of th e gas and that are a part of the sale valued in money.
whether paid in money or oth erwise , and including any amount
for which cre dit is given to th e purchase r by th e s e ll e r without
any deduction on account of th e cost of gas sold, the cost of
mate rials use d, l abor or service costs, int e rest charge d, loss e s,
or any other expense whatsoe v er.—Th e re fore all charges for
tangible personal—prope rty—and
—
s en ic e s—p vided—m—the
production and de liv ery of gas to th e purchaser are a part o f
th e sal e of piped natural gas upon which the tax i s due
notwith standing that some charges may be bill ed s eparat e ly to
th e customer for th e met e red s en ic e .
The following list de scrib e s specific charges for piped natural
gas and stat e s wheth e r th e charge s are taxabl e gross re c e ipts:
f-H A utility must report rec e ipts from sal e s of piped
natural gas on an accrual bas is. The applicabl e tax
must be s eparately—
s
tated on th e bill to each
custom er. A sal e by a uti l ity of piped natural gas is
considered to accrue when the utilitv bi -the
cu stomer for the sal e . The applicabl e tax is du e on
gross rec e ipts de riv ed from th e sal e of piped natural
gas without any d eduction for any franchise tax th at
is du e .—The re c e ipts must be re fl e ct ed on th e
Utilit i es and Municipaliti e s Sal e s Tax Re port. Form
E 500E. which is to be fil ed monthly on or before
th e dat e s et in G.S. 105 161.16(c).
(33- S e rvic e charges to customers when th e company
first suppli es gas unde r any applicabl e rat e schedule
are a part of gross rec e ipts from sal es of gas subject
to tax
(3} The amounts actually—charged to custome r s for
piped natural gas consumed for th e billing pe riod are
th e amount s on which th e tax is du e and tax i s to be
charged notwithstanding that th e custome r s may be
und er equal pay agreements.
(44 Charges for reconn ecting s en ic e to custome rs aft er electricity
{$) Sales of piped natural gas to a manufacturer that
ent e rs into or become s, an ingredient or component
part of th e manufactured product are exempt from
s al e s tax. m
{&) Sal es of piped natural gas dire ctly to the UnitecT
Stat e s Governme nt or any agency thereof are not
s ubj ect to s al e s tax.—In order to be a s al e to th e
United—Stat e s—Governme nt.—th«
—
Government—ef
agency involv ed must make th e purchase of piped
natural gas and pay—dire ctly to the vendor the
purchase pric e of the piped natural gas.—Whil e a
utility' s—sales
—
dire ctly—ie—the
—
United—Stat e s
Governme nt or an agency th e reof are exempt from
s al es tax. a utility must obtain a purchase requisition
on e time from each agency for its records.
(7-) Sales of piped natural gas to regist ered utility
companie s for resal e are ex empt from sal e s tax
when th e sal es are supported by properly completed
Ce rtificate s of Re sal e . Form E - 500.
{&) Energy audit amounts charged to custom ers for a
comprehensive en ergy audit provided by a utility are
not a part of gross rec e ipts from sal es of piped
natural gas subj e ct to s al es tax.
{$) Late payment charges bill ed on a balance that was
not paid on th e previous month's bill are not a part
of gross rec e ipts of sal es of piped natural gas subj ect
to sal es tax.
-(4-6-* Return check charge s for checks re c e iv ed by a utility
in payment of an account and returned by th e bank
^
because of insuffici ent funds are not a part of gros d
re c e ipts from th e sal e of piped natural gas subject to
sal e s tax.
(444 Accounts of purchasers repre s enting taxabl e sal e s
on which th e sa le s tax has been paid that are found
to be worthl e ss and are actually charged off for
incom e tax purposes may. at corresponding periods.
be deducte d from gross sal es.—Any amount that is
deducted and subseque ntly coll ected mus t be added
to gross sal e s.
-(45-) Local sal e s tax e s do not apply to gross rec e ipts
derived by a utility from sal es of e l e ctricity.—Local
sal e s taxe s apply to rec e ipts from sal es and l e as e s of
tangibl e personal property that are subj ect to th e
four perc ent stat e rat e of tax.
fe-)
—
Sal e s of fu e l, oth e r than e l e ctricity and piped natural
gas. for re sid e ntial h eating purposes are s ubj e ct to th e four
pe rc e nt stat e tax and any applicabl e local sal e s or use tax.
Sal e s of coal in it s original stat e are ex empt from tax whe n th e
sales are made by th e producer, or th e producer's age nt, in th e
capacity—of a produce r and th e coal is de liv ered to th e
purchaser directly from th e min e .
(a) Electricity — Electricity is tangible personal property
and jts sale is subject to tax at the rates set ]n G.S. 105-164.4.
Local sales and use taxes do not apply to sales or purchases of
servic e has been terminat ed for nonpayme nt are a
part of gro ss rec e ipts from sal e s of piped natural gas
subj e ct to s al e s tax.
(b) Other Fuel. ~ Sales of bottled gas, coal, coke, fuel oil.^|
oxygen, acerv lene. hydrogen, liquefied petroleum gas, or other
combustibles to u sers or cons umers are subject to the four
"2 SORTH CAROLINA REGISTER November 2, 1998 13:9
PROPOSED RULES
percent State tax and the 2% local tax unless they are exempt
from tax under G.S. 105-164.13 or subject to a lower rate of
tax under G.S. 105-164.4. Sales of piped natural gas are
exempt from sales tax and are subject to the excise tax
imposed by Article 5E of G.S. 105.
Authority- G.S. 105-164.4; 105-164.6; 105-164.13: 105-
164.16; '105-262.
TITLE 25 - OFFICE OF STATE PERSONNEL
Notice is hereby given in accordance with G.S. 150B-21.2
that State Personnel Commission the intends to adopt the
rules cited as 25 NCAC IB .0354: U .0512; and amend the
rules cited as 25 NCAC IB .0431 1H .0602, .0605-. 0606; U
.0503. .0603. Notice of Rule-making Proceedings was
published in the Register on September I. 1998.
Proposed Effective Date: July 1. 1999
A Public Hearing will be conducted at 10:00 a.m. on
December 3. 1998 at the Administration Building. 3
rd
Floor.
Raleigh. NC.
Reason for Proposed Action: The Office of State Personnel
administers personnel regulations for dozens ofstate agencies
employing thousands ofstate employees and their supervisors.
Recruitment and selection procedures and grievance
procedures are referred to every day in dozens of situations.
Adherence to the notice and hearing requirements for the
adoption ofproposed rules submitted would potentially delay
or defeat justice in grievance situations and would leave
managers without rules to aid them in the proper
implementation of this statute in the recruitment and selection
process.
Comment Procedures: Interested persons may present
statements orally at the public hearing or in writing by mail
addressed to Delores J. Stanley. Office ofState Personnel. 116
West Jones Street. Raleigh. NC 2 7603.
Fiscal Note: These Rules do not affect the expenditures or
revenues of state or local government funds. These Rules do
not have a substantial economic impact ofat least five million
dollars (S 5. 000.000) in a 12-month period.
CHAPTER 1 - OFFICE OF STATE PERSONNEL
SUBCHAPTER 1 B - STATE PERSONNEL
COMMISSION
SECTION .0300 CONTESTED CASE HEARING
PROCEDURE
.0354 TIME FRAME FOR RAISING ALLEGATION
OF VIOLATION OF G.S. 126-14.2
Allegations of a violation of G.S. 126-14.2 must be raised in
a complaint to the Civil Rights Division of the Office of
Administrative Hearings (OAH-CRD) within 30 days after the
employee or applicant for initial employment receives written
notice that a position for which the employee or applicant
applied was filled. After an initial determination by the OAH-CRD
that there is probable cause to believe that there has been
a violation of G.S. 126-14.2. the employee or applicant must
file a contested case petition pursuant to G.S. 126-14.2 and
Article 3 of G.S. 150B within 15 days.
Authority G.S. 126-14.2.
SECTION .0400 - APPEAL TO COMMISSION
.0437 APPEAL TO THE STATE PERSONNEL
COMMISSION: PROCEDURES
(a) The State Personnel Commission shall receive the
record in the contested case forwarded by the Office of
Administrative Hearings and make a final administrative
decision in the case. The Office of State Personnel shall be
responsible for the administrative management of contested
cases coming before the Commission for its review and
decision.
(b) Oral Argument. Either party to a contested case may
request the opportunity to appear before the State Personnel
Commission and make oral argument, argument jn al] cases
except those arising under G.S. 126-14.4. Such arguments
shall be based solely on the information contained in the
record submitted by the OAH. Oral arguments shall be
requested in writing no more than 4-5 j_0 calendar days after
notice of review by the Commission has been sent to the
parti es , parties that the Commission has received the official
record from the OAH in the contested case. After 30 calendar
davs have passed since the notice to the parties that the official
record has been received by the Commission, the Commission
shall send a The notice of review which shall contain the date,
time and place of the Commission meeting at which the case
shall be reviewed. If a party fails to request oral argument in a
timely fashion, that party may not be allowed to present oral
argument. Each party requesting oral argument shall be
allotted a maximum of 44 JO minutes for the presentation.
presentation, unless the time period is extended by a vote of
the Commission. All requests to speak for more than 10
minutes shall be made jn writing in the same document which
requests the opportunity to make oral argument. The party
which did not prevail before the Administrative Law Judge is
entitled to make the first oral argument and to present a
rebuttal. if both parties are seeking changes in the
Administrative Law Judge's recommended decision, both
parties may present a rebuttal and the party with the burden of
proof in the contested case is entitled to the last rebuttal.
(c) Briefs. Legal Memoranda. Attorney's Fees Requests. All
briefs and legal memoranda in cases other than those arising
under G.S. 126-14.4 shall be received by the Office of State
Personnel no later than 4-0 working 30 calendar days prior to
th e date of th e Commission meeting for which a case is
sch edul ed for revi ew after the date of the notice sent bv the
13:9 NORTH CAROLINA REGISTER November 2, 1998 773
PROPOSED RULES
Commission notifying the parties of the Commission's receipt be granted by the Administrator for good
of the official record from the QAH. Such documents shall
also be served upon the opposing party. Such a document
received after the deadline shall be presented to the
Commission only after the party has shown that the opposing
party was served with the document at l ea s t 10 work i ng days
before the Commiss ion meeting, no later than 30 calendar davs
after the date of the notice sent by the Commission notifying
the parties of the Commission's receipt of the official record
from the QAH. Attorney's Fees fees Request s requests must
be presented to the Commission by the prevailing party to a
Commission Decision and Order at least one month before the
meeting at which the matter is to be considered. Such requests
must also be served upon the opposing party The
Commission will notify the parties upon the receipt of a
request for attorneys fees and provide an opportunity for the
opposing party to file objections to the fees requested. If the
parties wish to make oral argument on an attorney's fees
request, a request for oral argument must be received by the
Office of State Personnel within two weeks after the filing of
the attorney's fees request and at least one month prior to the
meeting at which such oral argument js requested. An
extension of time to file documents with the Commission ma\ to file documents with the Commission ma\ be granted b\ the
Commission ma\
cause shown.
(e) Proposed Decision and Order. Each party to a contested
case shall submit a proposed Decision and Order I'M
consideration by the Commission in that case. The proposes
Decision and Order shall be received by the Office of State
Personnel no later than 1 working days prior to th e dat e of the
Commi ssion meeting for which a ca se is scheduled for revi ew.
30 calendar davs after the date of the notice sent by the
Commission notifying the parties of the Commission's receipt
of the official record from the QAH. The Commission may
delay decision in a case until all parties have all parties have
submitted a proposed Decision and Order. The proposed
Decision and Order shall indicate which findings, conclusions,
and recommendations of the Administrative Law Judge are
being deleted or amended and why. and what new findings,
and conclusions are being adopted. The proposed Decision and
Order shall contain an order in the case for the signature of the
Administrator to the Commission, consistent with and
supported by the findings and conclusions. Parties shall
submit 4-0 20 copies of each pleading (with three holes in the
left margin) filed with the Commission. An extension of time
be granted bv the Administrator for good cause shown.
(d) Written Exceptions. Proposed Alternative Findings.
Conclusions and Recommendations. Each part) shall submit
written exceptions to the recon 'ended decision of the
Administrative Law Judge, unless the party accepts the
recommended decision in its entirety. Any party may choose
to submit proposed alternative findings of fact and conclusions
of law. Exceptions and alternative findings and conclusions
shall be received by the Office of State Personnel no later than
10 working day s prior to the dat e of the Commission for which
a case i s schedul ed for review. 30 calendar davs after the date
of the notice sent by the Commission notifying the parties of
the Commission's receipt of the official record from the QAH.
Written exceptions shall be specifically drawn. Exceptions
shall indicate which finding, conclusion, or recommendation is
being excepted to and the basis for the exception being taken.
Reference must be made to the transcript (and volumes, where
applicable), if the transcript of the hearing was made. Where a
part) excepts to a finding, conclusion, or recommendation and
requests its deletion or amendment, an alternative finding,
conclusion, or recommendation shall be made. Such a
document received after the deadline shall be presented to the
Commission only after the parry has shown that the opposing
party was served with the document at l east 10 working day s
be fore th e Commission meeting, no later than 30 calendar davs
after the date of the notice sent bv the Commission notifying the official record from the Office of Administrative Hearings.
the parties of the Commission's receipt of the official record
from the QAH. The Commission shall have the authority to
adopt the findings of fact and conclusions of the
Administrative Law Judge, or to amend the same, or to adopt
alternative findings of fact and conclusions of law. either from
those submitted by the parties or drawn from its own review of
the whole record. Parties shall submit 4-0 20 copies of each
pleading (with three holes in the left margin) filed with the
Commission. An extension of time to file documents w ith the
Administrator for good cause shown.
(f) Service on Opposing Parties. Copies of all documents
required by this Rule shall be served on the opposing party,
but no later than 1 working days prior to th e date of the
Commission meeting for which a case is schedul ed for re vi ew.
30 calendar davs after the date of the notice sent by the^.
Commission notifying the parties of the Commission's receirjB ;
of the official record from the QAH.
(g) Notification. The parties or when applicable, the legal
representative of record for a parry, shall be notified, by
certified mail, return receipt requested, of the Commission's
decision. The Commission's decision shall be prepared and
sent out by the Office of State Personnel. Copies or the content
of a specific decision and order shall not be released to non-parties
until the Office of State Personnel has knowledge that
all parties have received a copy of the Decision and Order.
(h) Cases arising under G.S. 126-14.4. in contested cases
arising under G.S. 126-14.4. where the Commission is
required to make a decision within 60 davs of receipt of the
official record, the parties shall not be entitled to appear m
person before the Commission and make oral argument.
Instead, either party may request an opportunity to make oral
argument to the Commission jn a teleconference (or by other
video or audio electronic conferencing means) within 10
calendar davs of notice bv the Commission that it has received
If a party requests the opportunity to present oral argument ]n a
teleconference, a teleconference shall be scheduled by the
Office of State Personnel and a Notice of Rev jew via Tele-conference
shall be sent to the parties which shall contain the
date and time the teleconference will take place and the
telephone numbers at which the parties will be called. N
delays in scheduling the teleconference will be permitte
Ntm
tgdB
which would prejudice the Commission's ability to render its
w ritten decision |n compliance with the statutory 60-dav
774 \ORTH CAROL1\A REGISTER November 2, 1998 13:9
PROPOSED RULES
deadline. Any briefs or legal memoranda which the parties
wish to submit must be received by the Office of State
Personnel no later than 14 calendar days after notice that the
Commission has received the official record from the Office of
Administrative Hearings. An extension of time to file
documents with the Commission may be granted by the
Administrator for good cause shown. Each party requesting
oral argument shall be allotted a maximum of J_0 minutes for
the presentation, unless the time period is extended by a vote
of the Commission. All requests to speak for more than 10
minutes shall be made in writing ]n the same document which
requests the opportunity to make oral argument. The parts
which did not prevail before the Administrative Law Judge is
entitled to make the first oral argument and to present a
rebuttal. If both parties are seeking changes m the
Administrative Law Judge's recommended decision, both
parties may present a rebuttal and the party with the burden of
proof in the contested case is entitled to the last rebuttal.
Authority G.S. 126-4.
SUBCHAPTER 1H - RECRUITMENT AND
SELECTION
SECTION .0600 - GENERAL PROVISIONS
.0602 POSTING AND ANNOUNCEMENT OF
VACANCIES
(a) All agencies shall select from the most qualified persons
to fin vacant positions. Employment shall be offered based
upon the job-related qualifications of applicants for
employment using fair and valid selection criteria 2nd not on
political affiliation or political influence. For purposes of this
policy, "political affiliation" is the membership in,
participation in. or support of. a particular political party,
group, or candidate; "political influence" occurs when political
affiliation impacts the decision to hire or not to hire and the
selection decision was not based on fair and valid selection
criteria.
fa-Hb) Vacant positions to be filled in state government shall
be publicized by the agency having the vacancy to permit an
open opportunity for all interested employees and applicants to
apply. The term "agency" as used in this Paragraph includes all
state departments, institutions, commissions, and boards. The
recruitment and selection process shall be consistently applied,
non-discriminatorv and promote open and fail competition and
the hiring of a diverse workforce.
fb)(c) Vacancies which shall be filled from within the
agency workforce shall have an application period of not less
than five working days and shall be prominently posted in at
least the following locations:
( 1
)
The personnel office of the agenc\ having the
vacancy: and
(2) The particular work unit of the agency having the
vacancy.
fe-Md) If the decision is made, initially or at any time a
vacancy remains open, to receive applicants from within the
overall state government workforce, that vacancy shall be
listed with the Office of State Personnel for the purpose of
informing current state employees of the opening. Such
vacancies shall have an application period of not less than
seven working days from the time the listing is received by the
Office of State Personnel. Each vacancy for internal posting
or listing with the Office of State Personnel will be described
in an announcement which includes at minimum the position
number, title, salary range, key duties, essential functions,
knowledge and skill requirements, minimum education training
and experience standard, the application period and the
appropriate contact person. Each vacancy listing must include
a closing date unless the classification has been determined as
critical. Factors used in determining critical classifications
shall include: agency turnover; number of positions in class;
geographic location; scarcity of skills; safety, health or quality
of care for clients. Such critical classifications, which will not
require closing dates on vacancy postings, shall be approved
by the State Personnel Commission. On those classes
determined to be critical, which are considered open,
continuous postings, agencies shall determine how long
applications will be considered active. Posting requirements
shall not apply to:
( 1
)
Vacancies which must be used to meet management
necessity, for which an agency will not openly
recruit. Examples include vacancies committed to a
budget reduction, vacancies used for disciplinary
transfers or demotions, use of an existing vacancy to
avoid reduction in force, and transfer of an
employee to an existing opening to avoid the threat
of bodily harm, harm, and th e promotion of an
empl oyee into an opening under a formal, pre
existing "understudy arrangement" .
(2) Vacancies for positions which have been designated
po l icy making exempt policy-making under G.S.
126-5(d).
(3) Vacancies which must be filled immediately to
prevent work stoppage in constant demand
situations, or to protect the public health, safety, or
security.
(44 Vacancies which are not fi l led by open recruitment,
but rather by specific and target ed recruitment of
special groups for th e Mode l Cooperative Education
and stat e governme nt intern programs.
f§-)(4) Vacancies for positions to be filled by chief deputies
and chief administrative assistants to elected or
appointed department heads; and vacancies for
positions to be filled by confidential assistants and
confidential secretaries to elected or appointed
department heads, chief deputies, or chief
administrative assistants. The decision to exercise a
vacancy posting exception based upon Paragraphs
(b)£d)(l) and (3) of this Rule shall be the
responsibility of the agency head. The Office of
State Personnel is available upon request to provide
counsel and guidance in instances of uncertainty.
13:9 NORTH CAROLINA REGISTER November 2, 1998 775
PROPOSED RULES
fd-He) Any vacancy for which an agency wishes to consider
outside applicants or outside applicants concurrently with the
state government work force shall be listed simultaneously
with the appropriate Employment Security Commission office,
as required by G.S. 96-29, and with the Employment Practices
and Priorities Divi s ion Section of the Office of State
Personnel. Listings will include the appropriate announcement
information and vacancies so listed shall have an application
period of not less than seven work days.
fe4(f) If an agency makes an initial effort to fill a vacancy
from within the state government work force only, and is
unsuccessful, the listing with the Employment Security
Commission would take place when a decision is made to
recruit outside. A vacancy which an agency will not fill for
any reason should not be listed; if conditions change, it should
then be treated as a new vacancy.
ft-Mg) The Office of State Personnel may withhold approval
for an agency to fill a job vacancy if the agency cannot prove
to the satisfaction of the Office of State Personnel that it
complied with these posting requirements. If any agency hires
any person in violation of these posting requirements, and it is
determined by the Office of State Personnel that the
employment of the person hired must be discontinued as a
result of the posting violation, the agency shall pay such
person for the work performed during the period of time
between his her initial employment and separation.
fg-Hh) When a vac icy is listed with the Employment
Security Commission, the listing agency may not fill the job
opening for at least 2 1 days after the listing has been filed and
the local office with which the listing is made shall be notified
by the agency within 15 days after the vacancy is filled. Upon
agency request the Employment Security Commission may
waive the waiting period for filling listed vacancies in job
classifications for which the State Personnel Commission has
recognized candidates are in short supply if it hinders the
agency in providing essential services.
Authority G.S. 96-29: 126-4(4): 126-5(d); 126-7.1.
.0605 SPECIAL APPLICANT CONSIDERATIONS:
AGENCY RESPONSIBILITIES
(a) Priority Reemployment Consideration. State employees:
( 1
)
who have received notification of imminent
separation due to reduction in force: or
(2) who have been removed from a policy
mak i ngs confidential exempt positions, for reasons
other than cause cause, or who have been removed
from managerial exempt positions for reasons other
than cause but not for a violation of G.S. 126-14.2;
oi
(3) who have been removed from an exempt managerial
position for a violation of G.S. 126-14.2;
are afforded priority reemployment consideration under the
State Personnel Act. A list of all classes having applicants
with priority status will be sent to all agencies by the Office of
State Personnel and will be updated frequently. When a
vacancy occurs, the appointing authority must review the latest
list before initiating am recruiting efforts. If the classification
of the vacancy appears, a priority certificate must be requested
and the appropriate priority afforded. While in most instances
priority applicants will be on a priority certificate for classes of
their principal qualification, these applicants are free to applw
for any vacancy of their choice. If determined qualified,
regardless of whether they are currently on a priority certificate
for the class of the vacancy, the priority must be afforded.
(b) Veteran's Preference. State law requires that
employment preference be given to veterans, widows of
veterans, and wives of disabled veterans. Persons entitled to
such preference must so indicate on any application filed.
Verifying documentation may be required by the agency if
desirable.
(c) Age Limitations.
(1) Minimum Age - The minimum employment age is
18. Exceptions are provided under the law if the
employing agency procures an Employment
Certificate from the County Social Services
Department.
(2) Law Enforcement Officers - Law enforcement
officers must be at least 2 1 years of age.
(3) Maximum Age - There is no maximum age for
employment.
(d) Employment of Relatives. Members of an immediate
family shall not be employed within the same agency if such
employment will result in one member supervising another
member of his immediate family, or if one member will occupy
a position which requires influence over another member's
employment, promotion, salary administration and other^
related management or personnel considerations. The intent of^/
this provision is to avoid an employment relationship which
would create problems within a work unit or offend the public
sense of equal opportunity. The term immediate family
includes wife, husband, mother, father, brother, sister, son,
daughter. grandmother. grandfather. grandson and
granddaughter. Also included are the step-, half- and in-law
relationships based on the listing in this Paragraph. It might
also include others living within the same household or
otherwise so closely identified with each other as to suggest
difficulty.
Authority G.S. 126-4(4): 128-15.
.0606 SELECTION OF APPLICANTS
(a) The selection of applicants for vacant positions will be
based upon a relative consideration of their qualifications for
the position to be filled. Using fair and valid selection criteria,
the agency will review the credentials of each applicant and
determine who possesses the minimum qualifications. From
those applicants who meet the minimum qualifications, a pool
of the most qualified candidates shall be identified. The pool
of the most qualified candidates shall be those individuals
determined to be substantially more qualified than other
applicants. The individual selected for the position must be
chosen from the pool of the most qualified applicants. Ini
making the determination of minimally qualified and most'
qualified, policies regarding pri ority consideration must be
applied. Advantage will be given to applicants determined to
776 SORTH CAROLINA REGISTER November:, 1998 13:9
PROPOSED RULES
be most qualified and hiring authorities must reasonably
document hiring decisions to verify this advantage was granted
and explain their basis for selection.
(b) Selection procedures and methods will be validly related
to the duties and responsibilities of the vacancy to be filled.
The Office of State Personnel will provide technical
assistance, upon request, to agencies wishing to design or
review selection procedures.
(c) After making the selection decision, the agency shall
provide timely written notice of non-selection of all
unsuccessful candidates in the most qualified pool-
Id) Each agenc\ shall develop a written Recruitment and
Selection Plan according to guidelines provided by the Office
of State Personnel. The Recruitment and Selection Plan
should meet the particular needs of the agency and provide
assurances to employees and applicants that the recruitment
and selection process will be based on fair and valid selection
criteria. Agency Recruitment and Selection Plans shall be
submitted to the Office of State Personnel for review and
approval by the State Personnel Commission. Anv changes or
additions to agency Recruitment and Selection Plans shall also
be submitted to the Office of State Personnel for review and
approval by the State Personnel Commission. Those agencies
not having a Recruitment and Selection Plan on file and
approved by the State Personnel Commission shall follow the
process set forth in the Office of State Personnel's
Recruitment and Selection Plan.
Authority- G.S. 126-4(4).
SUBCHAPTER U - EMPLOYEE RELATIONS
SECTION .0500 - EMPLOYEE GRIEVANCES
.0503 MINIMUM PROCEDURAL REQUIREMENTS
The following provisions are the minimum requirements for
approval bv the State Personnel Commission.
(1) An employee with a grievance that does not allege
unlawful discrimination as defined by G.S. 126-16
or G.S. 126-36. that does not allege a violation of
G.S. 126-7.1(a) or (c). G.S. 126-82. or that does not
allege a denial of employment or promotion in
violation of G.S. 126-14.2 shall be required to first
discuss the problem with the immediate supervisor.
Where the grievance does not fall within the
administrative or decision-making authority of the
immediate supervisor, the immediate supervisor,
shall within 48 hours of receipt of the grievance,
refer the grievance to the lowest level supervisor
with administrative or decision-making authority
over the subject matter of the grievance and notify
the employee of the fact of and the basis for the
referral. The agency grievance procedure must
outline those issues in addition to contested case
issues under G.S. 126-34.1. if anv. that are grievable
under each agency's internal grievance procedure
and whether and to what extent persons who have
not attained career status under G.S. 126 1A 126-1.1
may utilize the agency grievance procedure.
(2) The employee shall have the right to have the
derision of the immediate supervisor reviewed. The
step or steps after the immediate supervisor's step
must include a step at which the employee has the
right to orally present the grievance and where the
reviewer is outside the employee's chain of
command.
(3) Any decision rendered after the step of the
supervisor's decision shall be issued in writing and
the final agency decision shall be issued within a
reasonable period of time as defined in this Section.
(4) At the step involving the reviewer (person or body)
outside the employee's chain of command, the
employee shall have the right to challenge whether
the reviewer can render an unbiased decision. The
agency grievance procedure shall establish a process
for challenging the reviewer's impartiality and the
process for the selection of a replacement when
necessary.
(5) For matters that are contested case issues under G.S.
126-34.1. if the employee is not satisfied by the final
decision of the agency head, the employee shall have
the right to appeal to the State Personnel
Commission within 30 days of receipt of the final
agency decision. If the employee is unable within a
reasonable period of time to obtain a final agency
decision, the employee's right of appeal is governed
by G.S. 150B-23(f)~
(6) The agency shall state the methods of notifying
current employees and newly appointed employees
of any change to the agency grievance procedure no
la'.er than 30 days prior to the effective date of the
change.
(7) The agency shall establish the time limit for the
agency and employee to respond at each step in the
grievance procedure. No time limit for an agency to
respond or to act shall be more than twice the time
limit for the employee.
(8) The grievance procedure shall include the effective
date of the procedure and of any changes to the
procedure.
(9) The grievance procedure shall comply with the
requirements of 25 NCAC U .0615.
Authority G.S. 126-4(9); 126-4(10): 126-35; 150B-23.
.0512 VIOLATIONS OF G.S. 126-14.2
(a) A state employee or applicant for initial State employee
may complain directly through the Civil Rights Division of the
Office of Administrative Hearings about a denial of
employment or promotion if al] the following conditions apply :
( 1 ) the person alleging the violation applied for the
position [n question during the open application
period:
the person alleging the violation was not hired into
the position in question;
the person allegin g the violation was among the pool
121
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13:9 NORTH CAROLINA REGISTER November 2, 1998 777
PROPOSED RULES
of the most qualified applicants;
(4) the successful applicant for the position was not
among the pool of the most qualified applicants; and
(5) the hiring decision was ]n violation of G.S. 126-14,2
because of political affiliation or political influence.
(b) The complaining State employee or applicant must file
their complaint with the Civil Rights Division of the OAH
within 30 days after the complainant receives written notice
that the position in question has been filled.
(c) Upon an initial determination by the Civil Rights
Division of the OAH that there is probable cause to believe
that there has been a violation of G.S. 126-14.2, the
complaining State employee or applicant may file, pursuant to
G.S. 126-34.1 and Article 3 of OS, 1 50B, a petition for a
contested case hearing with the OAH Contested Case Division
within 15 days.
(d) The administrative law judge shall issue a recommended
decision to the State Personnel Commission. The State
Personnel Commission shall make a final written decision ]n
accordance w ith the law.
(ej l_f the initial determination by the Civil Rights Division
of the OAH is that there is no probable cause to believe that
there has been a violation of G.S. 126-14.2, that determination
shall be conclusive of any rights of further appeal to the State
Personnel Commission, but shall not be admissible or binding
in any separa'e or subsequent civil action or proceeding.
Authority- G.S. 126-4.
SECTION .0600 - DISCIPLINARY ACTION:
SUSPENSION AND DISMISSAL
.0603 APPEALS
(a) A career employee who has been demoted, suspended or
dismissed shall have 15 calendar days from the date of his
receipt of written notice of such action to file an appeal with
his department/university grievance procedure. Grievances
which do not allege discrimination a violation of G.S. 126-
7.1(a) or [c_L G.S. 126-82, or that do not allege a denial of
employment or promotion in violation of G.S. 126-14.2 must!
follow the department or university grievance procedure. An
appeal of a final departmental or university decision must be
filed in accordance with G.S. 150B-23 and within 30 calendar
days of receipt of the final agency decision.
(b) Grievances which allege discrimination may. at the
election of the employee, proceed through the department or
university procedure or proceed directly to the State Personnel
Commission (SPC) for a hearing by the Office of
Administrative Hearings (OAH) and a decision by the SPC. A
direct appeal to the SPC (such appeal involving a contested
case hearing by the OAH and a recommended decision by that
agency to the SPC) alleging discrimination must be filed in
accordance with G.S. I50B-23 and must be filed within 30
calendar days of receipt of notice of the alleged discriminatory
act.
(c) Grievances which allege a violation of G.S. 126-14.2
must be filed with the Civil Rights Division of the OAH within
30 calendar days after the employee or applicant receives
written notice that the position in question has been filled. The
employee or applicant must file a petition for a contested case
hearing pursuant to G.S. 126-34.1 and Article 3 of G.S. 150B
within 15 davs of the initial determination by the OAH Civil
Rights Division that there has been a violation of G.S. 126-
14.2.
fe)(d) Grievances filed on an untimely basis (see G.S. 126- *
14.4, G.S. 126-35. G.S. 126-36 and G.S. 126-38) must be
dismissed. Allegations of discrimination raised more than 30
calendar days after receipt of notice of the occurrence of the
alleged discriminatory act must be dismissed.
Authority G.S. 126-1A: 126-35: 126-36: 126-38: 150B, Article
3: 150B-23.
778 NORTH CAROLINA REGISTER November 2, 1998 13:9
APPROVED RULES
This Section includes the Register Notice citation to Rules approved by the Rules Review Commission